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Originally Posted On: https://www.shearwateraero.com/your-official-guide-to-aviation-equipment-financing/
Are your planes overdue for an upgrade to improved aviation equipment? Are you having trouble finding a banker who will approve your loan application? Other aviation owners have experienced the same treatment. Learn why they’ve turned to asset financing to pay for the modernization of their fleet.
Keeping Planes Up-To-Date is a Necessary Cost of Doing Business
Sooner or later, all aircraft owners have to upgrade their equipment. Keeping the older mechanical, electrical, and digital devices can cost you dearly in downtime as well as maintenance costs. Older planes also generally use more fuel than their modern-day counterparts thereby increasing the operating costs.
Updated aircraft rewards your investment with less downtime and more time in the air. Faster, trouble-free flights that make life easier for both the flight crew and the passengers.
Some proactive companies plan far ahead for equipment upgrades. They estimate the lifespan of certain key components and then mark their business calendars to remind them of when they will need to seek financing to perform the upgrades.
But we realize the private aircraft owners also need financial assistance to bring their planes up to date. Maybe the avionics belong to another era, or it could be the interior design that’s uncomfortable and behind the times. Either way, an upgrade can be expensive.
A Popular Aviation Equipment Upgrade
One way to keep your fleet current is to upgrade its flight decks. Perhaps, you’re still using CRT displays and want to move to modern LCDs. CRTs are fading quickly from airplanes. It’s going to become difficult to find replacement parts for outdated technology. It’s also going to be hard to find experienced CRT aviation technicians who are willing to offer technical support.
Making the switch has many other benefits including an increase to the resell value. When you eventually want to sell your old fleet, you’ll stand a better chance of selling planes with modern avionics rather than obsolete technology.
Why Banks May Not Be Your Best Lending Source
Our clients often turn to us for financing their aviation equipment when they’re unable to go to their neighborhood bank. The reasons may vary but typically are one of the reasons below:
They have a credit score that’s too low. When an individual aircraft owner is looking for a loan, his credit score is going to carry a lot of weight. Unfortunately, sometimes economic reversals have made it impossible for him to pay his bills and debts on time. A few dings to the average credit score are all it takes to move a credit rating downward into the bad-risk category.
They haven’t been in business very long. Banks prefer to do business with companies that have been around for a while. The length of time in a business that banks would like to see from a prospective client differs with each bank, but they want some sort of indication that the company will last long enough for you to pay the loan. Sadly, it’s often new businesses that are most in need of a financial shot in the arm.
The bank doesn’t like their collateral. You may have valuable assets, but unfortunately, it’s the kind of collateral that your bank doesn’t like to use for a loan contract. This rejection can be especially painful because you have an expensive item at your disposal that you can’t seem to put to good use.
They’re carrying too much or too little debt. Sometimes dealing with a bank feels like going on a blind date. You don’t know how you’re going to be judged. For example, if you’ve used your credit wisely and paid your bills on time, the bank could still reject your loan application because it feels that you’re carrying too much debt. On the other hand, if you use your credit more conservatively, a bank might complain that you don’t have enough of a track record to show that you can handle debt responsibly.
They have an unpredictable cash flow. If a bank spots clues that your business suffers from massive ups and downs in its cash flow, it’s less likely to approve your loan application. The bank wants to see a dependable level of cash flowing into your enterprise so that it will feel more confident in your ability to repay a loan.
Their aircraft business carries more risk than is typical. Does your business specialize in flying aircraft into remote and difficult-to-access parts of the planet? Do you operate aircraft under extreme weather conditions? Are you involved in rescue operations? The more risk inherent in your daily operations, the more skittish the loan manager becomes.
Their loan request is too small. Sometimes when dealing with banks, it’s a case of go big or go home. During financially successful times, a bank may politely turn down small loans because it’s more lucrative to the bank to process only large ones.
How to Use Asset Financing to Purchase Needed Equipment
Our clients have heard each one of the excuses above and countless more. When they tire of being turned down by conventional lending institutions, they turn to us for the loans they need to make purchases that include aviation equipment as well as new aircraft.
We aren’t interested in the same things that banks use to reject your application. Instead, we let your assets speak for you.
We specialize in asset financing which means that we don’t pay attention to your credit history. We have been able to offer our clients a variety of options that enable them to choose flexible solutions.
Get Started Today With Your Aviation Equipment Upgrade
Let the experts at Shearwater Aero Capital give you an idea of the value of your assets. All it takes is one phone call to get started updating your aviation equipment. Why wait any longer? Contact us today.