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Aviation Bridging Loans

Overview of Aviation Bridging Loans

What Are Aviation Bridging Loans?

Aviation bridging loans are a well-established form of aircraft finance. Bridging loans are generally characterised by their flexibility, short-terms and higher costs. While they have a number of different uses, from property purchases to share buybacks, they are becoming increasingly popular for the purchase of high value assets, such as aircraft. Aviation bridging loans help borrowers bridge the gap between their current purchase and a future, long-term financing solution.
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When Are Bridging Loans Used in Aviation Transactions?

Bridging loans are generally used in aviation transactions when the borrower needs fast access to funds in order to take advantage of a limited time opportunity. An example of this would be an open market sale, where the borrower needs to provide the purchase funds quickly in order to secure their purchase. Once the aircraft has been purchased, the borrower will then have more time to secure a longer-term facility at a cheaper cost.

How Bridging Loans Differ from Long-Term Aircraft Financing

Bridging loans differ from longer term finance in a number of ways:

  • Term: Bridging loans have much shorter terms than long-term aircraft finance. Where bridging loans last between 0 and 24 months, long term finance, on the other hand, can last up to 25 years, depending on the case.
  • Cost: Another important factor to consider is the cost of bridging loans. Aircraft bridging loans are more expensive than longer term aircraft mortgage. One of the primary reasons for this is the increased risk associated with an aircraft bridging loan, from a lender’s perspective.
  • Flexibility: Aircraft bridging loans have a great deal of flexibility, giving borrowers the ability to take advantage of non-standard opportunities, cross collateralise their debt and facilitate fast purchases.
  • Speed: When purchasing an aircraft, speed can often be the deciding factor between a successful purchase and a missed opportunity. In some cases, aircraft bridging loans can be arranged in a matter of days, whereas traditional aircraft finance would generally take between 4 and 8 weeks to arrange.

Typical Uses of Aviation Bridging Loans

Short-Term Acquisition Funding

Aviation bridging finance is commonly used to fund purchases of new and used aircraft. Bridging loans enable borrowers with the fast access to funds they need in order to take advantage of limited time opportunities.

Gap Financing Between Transactions

When upgrading from one aircraft to another there may be a short time before the sale of the existing aircraft when the borrower needs to pay for the purchase of the new craft. In this situation aircraft bridging loans are invaluable. Aircraft bridging loans enable borrowers the finance they need to purchase the new aircraft prior to the sale of their existing one.

Urgent or Opportunistic Aircraft Purchases

As with any asset class, buyers need to act quickly in order to take advantage of good opportunities. With this in mind, bridging loans are a useful tool in aircraft purchases, enabling borrower to move quickly.

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How Silver Oak Capital Can Help

  • Structuring the Right Short-Term Funding Solution

    Silver Oak Capital has worked on a number of aircraft bridging loans over the years, giving us a strong foundation in structuring and execution aircraft bridging finance.

  • Identifying Suitable Lenders Quickly

    We have a network of several hundred lenders, many of whom are specialist aircraft bridging lenders. This network enables us to source the most competitive bridging terms in the market, giving our clients access to the cheapest finance available.

  • Negotiating Terms to Minimise Cost and Risk

    When lenders provide terms, there is often room for negotiation, making it vital to have a knowledgeable broker (such as Silver Oak Capital) by your side.

FAQs

Aviation bridging loans can be arranged much quicker than traditional mortgage finance, giving borrowers the flexibility they need to take advantage of limited time opportunities. While most aircraft bridging loans can be arranged in 4 weeks, some can be arranged in a matter of days.
The loan-to-value ratio for aviation bridging loans will differ depending on the borrower’s profile and the aircraft specifications. Newer, more popular models are likely to secure higher LTV loans (+75%). Likewise, borrowers with stronger ALIE statements are likely to secure a higher LTV bridging loan as they are seen as less risky by lenders.
Yes, bridging loans can be used for a number of different reasons, as long as the underlying asset is strong and the borrower is seen as low risk. One important thing to note is that the lender will scrutinise the borrower’s repayment strategy before issuing the bridging loan. Because of this, it is important to have a certain, well-planned exit strategy before applying for any bridging loan.

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