Aircraft Financing Canada
Purchasing and Ownership of BizJet Aircraft

The current inflationary environment diminishes lenders’ credit appetite for specialty items such as aircraft financing. This is especially the case for financing of bizjets which traded at records highs due to the demand created with travel restrictions combined with a buoyant economy. Lenders offered financing at up to 90% of the purchase price, extended amortization periods and flexible repayment terms. As is typically the case, there is a knee jerk reaction and financing is now limited to selective financial institutions “FI’s” looking for low risk borrowers while offering more restrictive terms.

Aircraft Financing Canada Considerations:

Often even very well established companies may encounter difficulty in obtaining financing for an corporate aircraft from their FI as they may lack expertise and/or want to limit their exposure to the core business. As a result, you may need to source alternative lenders which can have a positive effect as your company’s primary lender’s financial covenants are not impacted by adding an aircraft loan.

Using a broker to obtain financing can be very beneficial as they have access to a wide variety of lenders and know the market. It is advisable to understand their remuneration which may be in form of a buy-sell rate arrangement with an FI whereby they earn income on the loan spread. This may place the broker in a conflict as they are being ultimately paid by the FI yet act for the borrower. By comparison my approach is to establish a fixed fee for all required services which is paid by the borrower. In addition to obtaining satisfactory financing, assistance can be provided with the purchase of the aircraft and most importantly working with the legal teams to close the purchase and financing.

Aircraft Financing Options and Terms:

All Canadian Banks provide loans and leases for aircraft financing canada however it can be difficult to find an account manager that has a good understanding of aviation. Several FI’s have aviation financing divisions with good expertise and offer favourable terms however borrowing costs can be higher.

For the high net worth individual or company there are several US based banks that operate in Canada that offer superior terms and excellent in-house expertise. They use the corporate aircraft financing as an extension of their private banking and wealth management offerings to bring in customers for their business banking.

Financing Your Purchase:

The most straightforward option is financing your purchase with cash which provides the advantages of reductions in closing time, borrowing costs and legal fees as well as eliminating the credit risk.  Most analysis however results in this cash put to better use elsewhere rather than on an asset with accelerated depreciation and variable market conditions therefore most purchasers will look to a form of leverage for the purchase.

Capital Leasing:

The capital leasing option generally limits the collateral to the aircraft which is owned by the lender and may require a lessor down payment than a loan.  Often there are more creative terms to a lease that while reducing the payment burden result in a higher actual borrowing cost and more significant breakage costs than a loan.  The accounting and taxation treatment of a capital lease is very similar to a loan and with no provincial sales tax applicable in B.C. on the purchase of a turbine powered aircraft this removes one leasing advantage of deferring payment of this tax over time.

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    Owning and Financing:

    Owning the aircraft and financing with a loan provides a lot of options and flexibility subject to negotiations with a lender.  The two items that receive the most attention are the advance rate (or loan to value) and loan amortization period for which lenders may have a formula such as 25 years less the age of the aircraft.  Often the objective for the lender is for these items to have an inverse relationship, e.g. the higher the advance rate, the lower the amortization period.  Both can be negotiated and influenced by having aircraft maintenance programs in place with assignment to the lender, considerations for condition and relative time of the aircraft and guarantees from a company or individual with strong cash flow and net worth.  

    With the recent and dramatic inflationary increase on interest rates borrowing costs can be double what they were a year ago thereby reducing the buying power of a purchaser.  It is therefore important to review your options when borrowing including having loans in CAD or USD, fixed or variable rates and swaps with potential ability to select a couple of these options such as having a portion in USD variable rate and the remainder in CAD fixed rate.


    The author, Peter Greenway, has been fortunate to have his career centred in aviation financing and heli-ski industries.
    For more information contact Peter:
    Mobile: 250-819-1008