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Financing Aircraft (even Homebuilts) Made Easy!
By Stacie Rine, NAFCO vice president of business development, EAA 1153620 Cory Puuri, EAA membership development manager, EAA 1108982
June 10, 2015 - Walter Tondu, EAA 522921, is about to build his second Van’s aircraft, an RV-8A. His first was an RV-7A. You might say he’s a bit of a loyalist; As Tondu would tell you, “It’s about the service.” And that’s the same reason he again went with EAA Finance Solutions administrator, NAFCO, when it came time to finance the RV-8A kit.
“NAFCO makes the process of financing a homebuilt project easy,” Tondu said. “I had such a great experience with the first kit I financed through them that I didn’t think twice about financing the RV-8A through NAFCO.
“Let me add that Joy, at NAFCO, was just awesome to work with. She obviously knows the experimental aircraft loan business inside and out and she treated me so very well.”
How easy is it to finance a homebuilt?
The first step is verifying that there are 25 aircraft on the FAA Registry, and finding at least three completed comparables (i.e., same make/model) for sale in the United States. Exceptions to these requirements are available for new models from well-established kit manufacturers (like Van’s) or where an independent appraisal is available.
NAFCO will average comparables to establish a value and can lend up to 85 percent of the calculated value or the purchase price, whichever is lower.
Depending on the stage of completion for the homebuilt, NAFCO requires 15-20 percent down payment on invoices provided by the vendor for the purchase. The loan terms will also be dependent on the stage of the process you are financing (kit only versus kit, engine, and avionics for completion).
Completed homebuilts require 15 percent down and can be considered for 10-20 year terms with interest rates determined by the make/model and loan amount.
Build (and finance) in stages
Just as building an aircraft is done and logged in stages, so is financing a build. Stage one is the airframe kit purchase. Loan terms include:
- 20 percent down on the airframe purchase and sent directly to vendor
- Up to a 10-year loan term
- Competitive rates (currently, 6.9 to 7.25%) driven by aircraft make and model
- Invoice for purchase price and associated costs - vendor will be paid directly
- “Builders” or “Ground-only” insurance must be bound and effective as of loan funding day
Stage two is refinancing the existing airframe loan to add in costs associated with firewall forward (engine, prop, avionics, etc.). Loan terms include:
- Up to 15 percent down on the parts and aircraft treated as a completed kit
- Up to a 10- to 20-year loan term
- Competitive rates driven by aircraft make and model
- Invoices for the purchase of all parts - vendors will be paid directly
- Full coverage in-motion insurance must be bound and effective as of loan funding day
In addition to a completed and signed application, full financial disclosures are required:
- Current credit bureau report
- Personal financial statement (less than 6 months old)
- Most recent two years’ personal and business (if applicable) federal tax returns
- Two years of W-2 forms and a current pay stub
Finally, you’ll need to provide aircraft specs (not required for pre-approval), and an N-number (registration number) will need to be reserved up front and we will register the aircraft with the FAA to secure the lien interest.
So, what’s the next step for Tondu? Finish his RV-8A and fly it to EAA AirVenture Oshkosh, of course!
If you have questions or would like to get started on a loan application, please visit EAA.org/finance, or call EAA Finance Solutions administered by NAFCO at 800-999-3712. Let them know you are an EAA member to get preferred rates and save nearly 20 percent on application fees.