A Business Flyer’s Guide to Aircraft Financing

It’s nice to know that you have options with regards to flying a plane especially if you travel extensively. What is the best route for you to go financially? There are a great many aircraft financing options for you to choose from as well as criteria to consider with regards to obtaining the best aircraft financing rates. But first, let’s look at the various ways an aircraft finance loan can be helpful to you as a business person who flies, in general, a good deal of the time.

Keeping Grounded
Even though you may fly quite a bit, you still want to feel grounded as far as meeting your deadlines and obligations. Many times commercial air travel can play havoc on the life of the business person who wants to keep to a schedule. Not only is there the factor of security to deal with, you are also challenged by traffic and crowds. In addition, flight plans can be delayed and canceled making it almost impractical to do business at times.
Therefore, considering an aircraft finance loan is a viable solution in contributing to your overall well-being when it comes to business and personal travel.

Commercial Aircraft Financing versus Fractional Ownership
Dependent on your current financial circumstances, owning a commercial jet can be a boon with regards to how seamlessly and smooth your day-to-day dealings go. Owning your own commercial plane can present a large initial outlay financially. In addition, you also have to anticipate continuing costs with regards to storage, maintenance, fuel and staffing requirements. Nevertheless, if you like the privacy afforded by choosing such an option, you will not mind to elect to finance commercially.

On the other hand, if you can’t allocate the time or resources in owning your own commercial craft, then fractional ownership can offer many advantages. The initial cost is less than owning your own jet because you own a share of the plane you choose to finance. Fractional ownership is a commercial aircraft financing option that affords the contributor the benefits of full ownership without the requirements imposed by trying to procure total financing.

Experimental Aircraft Financing
For those flyers who want to delve into the experimental side of flying, experimental aircraft financing is available for anyone who need funds for this type of purpose. You do need to be FAA certified and if your loan is a kit-built experimental plane, you generally will generally need to meet the requirement of a more sizable down payment. An appraisal is a needed in certain instances depending on the type of craft you’re interested in buying and the size of the loan.

Loan Packages
Several types of loan packages are available offering good aircraft financing rates depending of course on the type of plane you’re financing and its overall cost. Fixed aircraft finance loans are generally for 15 or 20 years. Nonetheless, you can obtain such loans for a shorter duration if you wish.

Fixed and adjustable rate loans are normally offered for 3 or 5 year terms. Adjustments to the aircraft financing rates are therefore adjusted every 3 or 5 years. These types of loans are ideal for anyone who is purchasing a plane that is sound mechanically and the prevailing market rates are low at the time of financing.

Index based loans work in much the same way as fixed and adjustable rate loan packages in that they are best secured when the market rate indices are low. This allows the borrower an opportunity to pay off the balance earlier and build equity in his aircraft.

If your plane is in need of a major overhaul, then you stand to gain by opting for a fixed-rate loan. Typically, these types of loans can be obtained for terms of 15 or 20 years.

Conclusively, you have a great opportunity afforded to you when you own an airplane. Take the above information in consideration. Use it to keep you on a steady course toward financial solvency.

How Can a Foreigner Finance a Property in Thailand?

Foreigners generally cannot obtain a mortgage from local Thai banks to finance the purchase of their Thailand property investment. Most of the financial institutions in Thailand provide loans for real estate purchases to Thais and Thai Companies.

In recent years Bangkok Bank (Singapore) has had a loan program for foreigners with qualification being very similar to that in the west. You complete an application, submit proof of income, tax returns and other documentation. With this program, buyers can finance up to 70% of the purchase price of the home. The problem with this program is that it has not been consistently offered, and as of this writing the program has been suspended.

In some resort areas such as Pattaya, local banks have begun to design loan programs for foreigners who live and work in Thailand. Kasikorn Bank, for example, allows foreigners who possess a work permit for 2 or more years to obtain mortgage financing for up to 50% of the value of the subject property. This program was just launched early 2010.

With the current global financial situation you are best to explore your options directly with Kasikorn Bank, Bangkok Bank (Singapore) and other lending institutions to determine the existing status of any loan programs which may be available for foreigners.

If you cannot get a Thailand mortgage to buy your dream property in Thailand, don’t worry. Several options are available to you.

Developer Financing

Developer financing has become more prevalent in Thailand over the past two years. Deals ranging from 2-year to 10-year financing are available to buyers of new Thailand houses and condos. These financing deals are available directly from the developers. As a result, the structure of each deal varies.

An example of such a program is The Meadows, a housing project in Pattaya. The developer offers 50% 3-year financing at 8% per annum. Although the loan term for this and other programs is not as long as conventional mortgages in the US and Europe, such programs are useful.

Be leery of offers for “free financing” or “0% interest”. Obviously the purchase price under these scenarios has been inflated to cover the cost of capital to the developer. It’s best to negotiate the best possible purchase price then negotiate the financing deal separate from the price. Make sure you have a clear indication of the market and market prices before agreeing to a financing arrangement.

Seller Financing

Individual property owners have recently become more open to extending financing to buyers of Thailand houses and condos as a means to stimulate interest in their resale property. Under such an arrangement, the buyer and seller sign both a purchase and sale agreement and a promissory note.

If you are working with a real estate agent, let them know you require financing. They will likely have some inventory of properties where sellers are extending payment terms. If you are negotiating directly with the seller, simply ask them if they are willing to accept payment terms for a defined period and rate of interest.

As with developer financing, negotiate the purchase price separate from the terms and conditions of the loan. Important to note is the fact that the seller will continue to hold the title deed (Chanote) to the property until the loan repayment is made in full. Make sure your lawyer reviews your deal and ensures that all documents are updated and properly safeguarded to protect your investment.

Other Options

There are generally two other options available to foreigners to finance their Thailand house or condo purchase. Historically, many foreign buyers had taken a mortgage against their property in their home countries. This is more difficult than ever given the economic crisis, yet still an option for some. Again, check with your local bank to determine what programs are available to you.

In some instances, the Thai spouse of a foreign national may qualify for a mortgage. In such event, the sale and purchase agreement (and promissory note) would be executed by the Thai spouse. If the foreign national is funding a substantial portion of the cost, the foreign national should register a long-term lease in his/her own name (with the Thai spouse as the “lessor” and the foreign national as the “lessee”). Consult with your attorney to minimize the tax implications of such an investment structure.

You may also use a lease structure to make your desired property affordable. Available structures include lease with the option to buy and long-term leases. Any lease for a term of more than three years can be registered on the title deed at the land office, thereby creating a property right in addition to a contractual right to occupy the house or condominium. Most local Thai lawyers can handle this transaction on your behalf for a small fee.

So don’t worry if you cannot obtain a Thailand mortgage for the purchase of your property. There are options available to you. Work with a real estate professional to help find the best property and financing structure for you.

How Commercial Lenders Went Wrong With Small Business Financing

Small business owners will be more likely to avoid serious future business finance problems with working capital management and commercial real estate loans by exploring what went wrong with business financing and commercial lending. This is not a hypothetical issue for most commercial borrowers, particularly if they need help with determining practical small business financing choices that are available to them. The bankers and banks responsible for the recent financial meltdown seem to be saying that even if anything actually went wrong, everything is fine now in the world of commercial lending. Nothing could be further from the truth. Commercial lenders made serious mistakes, and according to a popular phrase, if business lenders and business owners forget these mistakes, they are doomed to repeat them in the future.

Greed seems to be a common theme for several of the most serious business finance mistakes made by many lending institutions. Unsurprising negative results were produced by the attempt to produce quick profits and higher-than-normal returns. The bankers themselves seem to be the only ones surprised by the devastating losses that they produced. The largest small business lender in the United States (CIT Group) declared bankruptcy after two years of attempting to get someone else to pay for their mistakes. We are already seeing a record level of bank failures, and by most accounts many of the largest banks should have been allowed to fail but were instead supported by artificial government funding.

When making loans or buying securities such as those now referred to as toxic assets, there were many instances in which banks failed to look at cash flow. For some small business finance programs, a stated income commercial loan underwriting process was used in which commercial borrower tax returns were not even requested or reviewed. One of the most prominent business lenders aggressively using this approach was Lehman Brothers (which filed for bankruptcy due to a number of questionable financial dealings).

Bankers obsessed with generating quick profits frequently lost sight of a basic investment principle that asset valuations can decrease quickly and do not always increase. Many business loans were finalized in which the commercial borrower had little or no equity at risk. Banks invested almost nothing in cash (as little as three cents on the dollar) when buying future toxic assets. The apparent assumption was that if any downward fluctuation in value occurred, it would be a token three to five percent. In fact we have now seen many commercial real estate values decrease by 40 to 50 percent during the past two years. Commercial real estate is proving to be the next toxic asset on their balance sheets for the many banks which made the original commercial mortgages on such business properties. While there were huge government bailouts to banks which have toxic assets based on residential mortgages, it is not likely that banks will receive financial assistance to cover commercial real estate loan losses. As a result, a realistic expectation is that such commercial finance losses could produce serious problems for many banks and other lenders over the next several years. As noted in the following paragraph, many lenders have already drastically reduced their small business finance programs.

Inaccurate and misleading statements by commercial lenders about their lending activities for business finance programs to small business owners is an ongoing problem. Although banks have typically been reporting that they are lending normally with their small business financing, the actual results indicate something very different by any objective standard. It is obvious that lenders would rather not admit publicly that they are not lending normally because of the negative public relations impact this would cause. Business owners will need to be skeptical and cautious in their efforts to secure small business financing because of this particular issue alone.

There are practical and realistic small business finance solutions available to business owners in spite of the inappropriate commercial lending practices just described. The emphasis here is focusing on the problems rather than the solutions primarily because of the lingering notion by some that there are not significant current commercial lending problems. Despite contrary views from bankers and politicians, collectively most observers would agree that the multiple mistakes made by banks and other commercial lenders were serious and are likely to have long-lasting effects for commercial borrowers.

Small Business Finance – The Next Big Banking Problem?

For the past year, most banks and lenders have been subject to both disastrous operating results and negative publicity. Actual commercial lending activity reported by banks conflicts with the usual attempt by politicians and bankers to portray banks as normal and healthy. Most bank financial results have been disappointing after working hard to solve massive residential loan problems. It is reasonable to ask if commercial banking has more potential disasters about to emerge based on what has been seen and reported so far.

Based on a number of business financing statistics, commercial lending to small businesses is already on life support. In many cases, without government bailouts many commercial banks would have already failed. As bad as that perspective might sound, this report will provide an even more negative outlook for the future of small business finance programs. Unfortunately for banks and lenders, it does appear that business loans will be the next big problem.

During the past year or so, several banking problems have received significant publicity. The largely avoidable difficulties were primarily tied to increasing home foreclosures which in turn caused various investments tied to home loans to decrease in value. Such investments lost value so rapidly that they became known as toxic assets. When banks stopped making many loans (including small business financing), the federal government provided bailout funding to many banks to enable them to keep operating. While most observers would argue that the bailouts were made with the implicit understanding that bank lending would resume in some normal fashion, the banks seem to be hoarding these taxpayer-provided funds for a rainy day. By almost any objective standard, commercial lending activities have all but abandoned small business finance needs.

Small business financing appears to already look like the next big problem based on commercial finance statistics recently released by many banks. The general decline in commercial real estate values during the past several years is a major factor in this conclusion. Because many large commercial real estate owners could not make their commercial mortgage loan payments or refinance business debt, this has resulted in some significant bankruptcies. The resulting bank losses are clearly having an impact now on commercial lending to small business owners even though these difficulties were primarily happening with large real estate owners and did not usually involve small businesses.

Bank losses on large commercial real estate loans have caused many banks to reduce or stop their small business financing activities, and this has clear similarities to the earlier situation of residential mortgage loan toxic assets causing banks to stop normal lending because of capital shortages. The bank losses from large commercial property investors are producing a ripple effect that has caused small business financing to effectively disappear until further notice. While small business owners did not cause this problem, they are suffering the immediate consequences when banks are unable or unwilling to provide normal levels of commercial financing to them. This bad situation is made even worse when we learn that many banks are hoarding cash and approving fewer commercial loans to allow them to quickly pay bailout funds back to the federal government. The primary logic for this approach is that it will allow banks to resume excessive bonuses and compensation to their executives.

Unfortunately one problem will lead to another, as is common with complex circumstances. The failure to obtain normal business financing will most likely lead to an increasing number of commercial loan defaults by small businesses. Prudent business owners should begin to take action now in a timely manner to avoid such negative consequences. The most serious small business finance problems can be anticipated and avoided with appropriate action.

Even if they do nothing else, business owners should have a straightforward conversation with a small business finance expert to assess how exposed their business might be to the brewing commercial banking problems. If recent events are any indication, the banks themselves will not be very forthcoming about problems with their commercial lending practices. For many small businesses, the most objective business financing expert is not likely to be their current banker. To increase the chances that they receive sufficient small business loans in the face of ongoing lending problems, a healthy amount of skepticism and caution will be helpful for business owners.