How Banks Determine Aircraft Value in Today’s Market
Lenders are now looking more closely at market trends, recent sales, and the age of aircraft. In some cases, it’s nearly impossible to finance older, less mainstream aircraft, i.e. Merlins, MU-2’s, Twin Commanders, etc. As a general rule, turbine aircraft manufactured prior to 1975 are considered dinosaurs by most banks and aircraft older than 20 years generally require much larger down payments, and shorter terms. With so many banks exiting the market, those remaining are less willing to take the same credit risks they did in the past and are not “giving” interest rates away due to loan losses, diminished portfolio values, and repossessions. There still is plenty of money available to well qualified applicants but the aircraft as collateral, is being heavily scrutinized by underwriters and is now a much more important and significant piece of the entire credit package. Values are still determined by using the industry price guides, subscription internet multiple listing services, and independent appraisals but banks are starting to discount values even more based on the likelihood of continued deflationary forces. Another great quote from an unknown source is “Logic does not apply to bankers”. Be prepared to produce thorough financial statements, complete tax returns, and verification of cash and liquidity.