What are my options for financing a plane that will need an EO almost immediately after purchase?

Adam answers in August's edition. 
AOPA Aviation Finance

Question: I see on AOPA Finance that I can potentially finance an engine overhaul with sufficient equity in the plane. What are my options for financing a plane that will need an EO almost immediately after purchase? I am willing to put enough down on the note so that there is sufficient equity in the plane for an EO loan if I can roll that in. To be explicit, the plane is $37,500, and the EO estimate for that engine is $24,000. I am not sure what the equity requirement is, but let's say it is 40%. So, what I would hope is that I can get a loan  for $46,500 by putting down $15,000 on the plane, with the loan then completing the purchase price with $22,500, leaving $24K in the note for the EO. If the EO goes over that, I would just eat that cost myself.

A: Rolling an overhaul into a purchase is a fairly simple process. As part of our internal review and the lenders’ underwriting, two values for the aircraft will be determined. One as-is for the purchase and a second with a zero-time engine. Financing can be up to 85% of the final value with the overhaul included. In your example, assuming value is roughly equal to cost, financing would look like $31,875 towards the purchase (85% of $37,500) and $20,400 towards the engine for a total loan of $52,275. The initial $31,875 would be disbursed at the time of purchase with the remaining $20,400 disbursed once the engine has been installed and signed off by the A&P. We would be happy to discuss the details further if you would like. Just give us a call at 800.627.5263.

Question: I am purchasing a plane through my LLC and plane to do a lease back to the local aviation school with it. Since the LLC will be new and have no real business credit how will that affect the loan rate? Would AOPA finance require a personal guarantee from the members to back the loan up? If so is this a much more complicated process than purchasing the aircraft myself?

A: Owning an aircraft through an LLC does not affect the loan structure. The usage, however, will. Leasebacks to a flight school typically require a minimum 30% down payment with shorter terms and increased rates. This is due to the increased usage and faster depreciation than a personal use aircraft. All members of the LLC would be required to personally guarantee the loan. Lenders will rely on personal income to determine creditworthiness, not any projected income from the LLC. Being that it is a newly formed LLC, the process is no different than applying as an individual. Please give us a call so we can discuss your specific situation further and we can get you started with the approval process.

Have questions for Adam? He is happy to answer them. Submit your questions here. Great rates. Great terms. Helpful and responsive reps. Three good reasons to turn to AOPA Aviation Finance when you are buying an airplane. If you need a dependable source of financing with people who are on your side, just call 800.62.PLANE (75263) or click here to request a quote.

Adam Meredith
Adam Meredith
President of AOPA Aviation Finance Company
Adam Meredith, the longtime president of AOPA Aviation Finance Co., died after a long battle with cancer in December 2023. He is remembered for his passion for helping fellow pilots, leading a team devoted to putting flight training and aircraft ownership within everyone’s reach.

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