Finance.qxp_Finance 18/07/2022 16:05 Page 1
FINANCE
Buying a Jet? Top Industry AssetBased Loan Tips Asset-based loans have been a prominent feature of the business jet market in recent years, with owners benefiting from low interest rates. What tips do the experts offer for operators considering this finance option? Gerrard Cowan finds out…
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sset-based loans essentially refer to finance that is backed by a particular asset, such as a business jet. They generally do not require a financial statement disclosure, while there is limited, or no, need for a personal or corporate guarantor, according to Keith Hayes, Senior Vice President and National Sales Manager for PNC Aviation Finance. Instead, the terms of the loan depend on the amount of equity or down payment the buyer puts into the transaction. There are also benefits around the speed of closing the loan, Hayes adds. There are several alternatives. For example, borrowers could opt for a traditional credit-based loan, though this requires a full financial disclosure and a thorough underwriting process, and can take up to twice as long as an asset-based financing structure, notes Hayes. Another option is an operating lease structure, which offers flexibility in relation to tax
52 ❘ Vol 26 Issue 8 2022 ❘ AVBUYER MAGAZINE
benefits and off-balance sheet accounting treatment. However, asset-based loans have proved popular, and while PNC Aviation Finance offers a range of finance types, including credit-based loans and leasing options, the asset-based loans structure makes up over half its portfolio.
Asset-Based Loans: What’s the Attraction?
Asset-based loans have been more popular than leasing in recent years because of the low interest rate environment, says Brian Foley, one of aviation’s leading analysts. This has made loans more attractive, though he notes “leasing may now start gaining popularity as we enter a higher interest rate environment”. There are several benefits to the asset-based loans structure for business jet operators, according to Foley. In the US, owners are permitted to make tax www.AVBUYER.com
