Do you need private jet ownership for your business travel? With subject matter expertise, competitive loan structures and personalized service throughout the process, partnering with Cogent Bank for aviation financing can help you find the right aircraft and financing solution for your specific needs. We become actively involved in the deal from the onset and try to be part of your team of experienced aviation professionals. Our goal is to help you have a great experience purchasing and using your new plane. We are always happy to share our expertise and help you think of things you haven’t considered.
To learn more about aviation financing from Cogent Bank, we sat down with Jim Crowley, SVP Managing Director. Jim has deep experience in aviation financing, having previously run leasing companies and aviation financing for Key Bank, City National Bank of Florida, as well as starting the aviation lending platform for Guggenheim Partners.
How does aviation financing differ from other commercial loans?
One of the primary distinctions is whether the financed equipment is income-producing. In contrast to traditional income-producing equipment or real property, business aviation isn’t income-producing equipment in the traditional sense of the word. However, a privately owned aircraft can be a business tool that you work on while flying or use to accept last-minute meetings with out-of-state clients. It truly does define the expression that time is money and time is the most important resource to our clientele. Another difference is whether the borrower is a business or an individual. With aviation financing, our clients tend to be high-net-worth or ultra-high-net-worth individuals, such as CEOs, Principals, Managing Partners, and Venture Capitalists, versus corporations. For taxes and other reasons, we generally recommend that they put the aircraft into a special purpose entity where they personally guarantee the obligation instead of having their company guarantee the obligation in most instances.
What is the typical timeline for financing an aircraft purchase?
The majority of our deals, about 90%, involve used airplanes with a useful life of approximately thirty plus years. While a finite number of new business jets (approximately 700 to 900) are sold every year, there are thousands of trades in the used market. There are more than 39,000 trades used business jets and turboprops in service globally. The United States represents 65% of that market.
The term sheet to funding process can be as short as 4 weeks or as long as 3 months, depending on where the client is in the acquisition process. For example, have you structured a LOI and completed a pre-purchase inspection of the aircraft?
An important early step is for the borrower to establish a special purpose entity or LLC to house the aircraft. Then we get the personal guarantee from the high-net-worth individual who owns that SPE. We focus on the client’s liquidity, ability to service the debt, character, aviation history, and mission objectives for the asset. We are also keenly interested in our clients having strong and well-known third-party managers to care for the asset, assuming they do not have their own flight department.
When it comes to LTV, we lend anywhere from 70-85% of the airplane’s purchase price. We make our own assessments of value—we have an asset manager who’s been with us for a long time. The condition of the engines is critically important, as well as the pedigree–has the plane been in a hanger its whole lifetime or parked outside in tough climatic conditions? Our transactions tend to range from $4-$25 million and the loan is amortized depending on the quality of the asset, with balloon payments at the end of our base five-year term. All the aircraft we finance (mortgage first lien holder) are registered in the United States with the FAA.
What types of aircraft have you financed before?
We don’t finance propeller/single-engine planes used primarily for personal use. Instead, we’re in the business jet market, starting at $2-$3 million going to as high as $75 million. Some of the most popular models we see are the Bombardier Global 6000, Gulfstream 550, Embraer Phenom 300 E, Dassault Falcon 2000, and Cesena CJ and Latitude series.
What separates Cogent Bank from other institutions that might offer aircraft financing?
Most of the other places I’ve worked at have been significantly larger than Cogent. Our more modest size has worked very well in our favor. We are an incredibly nimble organization with the capability to be creative and much more responsive than some of our larger competitors. Our aviation financing team gets so much support from everyone on the Cogent team–the entire company is truly dedicated to client support and always goes the extra mile to see that we have the best chance to succeed.
Do you offer personal aviation financing?
No, we only work with business leaders and there must be a business-specific reason why they’re purchasing the plane. Often, our clients’ personal and business lives are intertwined. For example, they may be flying to Europe for a sporting event in addition to a handful of mission critical meetings.
What advice would you offer to someone considering an aircraft purchase?
Approximately 10% of credit worthy wealth individuals in the United States are currently business aircraft owners. We are here to provide these first-time buyers with subject matter expertise and recommend legal, tax, and technical experts to support their acquisition and make it a very positive buying experience. Our aviation financing team views our role as consultative.
Meet Cogent’s Business Aviation Financing Team!
Jim, Margaret Francik (VP Operations Manager), and Patti (SVP Risk Officer) are dedicated to providing the best possible Business Aviation Lending experience. Contact us to learn more about our approach to business aircraft loans and how we can help you buy your first or next business jet.