By Preston Holland | Prestige Aircraft Finance
Co-host of The VIP Seat Podcast | Author of Private Jet Insider
TL;DR: Most aircraft financing mistakes aren’t made at the closing table – they’re made in the weeks before. Skipping pre-approval, sticking with a bank that doesn’t understand aviation, ignoring total ownership costs, choosing the wrong loan structure, and rushing the closing process are the five mistakes I see most often. Each one is completely avoidable. Here’s how.
I’ve been structuring aircraft deals for years – closing 31 transactions totaling over $150 million in 2025 alone, across everything from a $200K Cherokee to multi-million dollar Challenger 350s. First-time buyers, seasoned corporate operators, everyone in between. The financing process isn’t complicated – but it is unforgiving if you walk in unprepared.
These aren’t hypothetical mistakes. Every one of them I’ve watched happen in real time, with real financial consequences. A few cost buyers tens of thousands of dollars. One nearly killed a deal entirely.
If you’re serious about buying an aircraft, read this first.
Mistake #1: Not Getting Pre-Approved Before You Start Shopping
This one is so common it almost feels normal – but it’s the mistake that sets every other mistake in motion.
Here’s how it usually plays out: a buyer finds a great airplane, falls in love with it, makes an offer, and then starts thinking about financing. Now they’re working under deadline pressure, the seller has other interested parties, and the buyer doesn’t know what terms they’ll actually qualify for. Negotiating from weakness on every front at once.
I had a client – a business owner looking at a late-model turboprop – who did exactly this. He found the aircraft, made a handshake agreement, and came to me two days later. The aircraft was priced at the top of what he could reasonably finance. We made it work, but he had almost no leverage on price because the seller knew he was already emotionally committed. That deal cost him more than it needed to.
Why it’s costly: Without pre-approval, you don’t know your real budget. You might be shopping $2.5M aircraft when you’re actually best positioned for $1.8M. You might discover mid-process that your debt-to-income ratio is a problem. And when you finally get to the lender, you have no rate lock – which means if rates move, you absorb the change.
How to avoid it: Get pre-approved first. A solid pre-approval clarifies your actual budget, typically locks your rate for 30 days (with approval valid for up to 90 days), and positions you as a serious buyer the moment you make an offer. You shop with confidence. You negotiate from strength. It costs you nothing and changes everything about how the rest of the process goes.
Mistake #2: Only Talking to Your Local Bank
This one is well-intentioned. You have a relationship with your business bank, you trust them, and you’ve gotten loans there before. Why not start there?
Because aircraft lending is a specialty product. Most commercial banks – even very good ones – don’t understand how to value an aircraft, assess airframe condition as collateral, or think about mission profiles and resale. They’re built for real estate and business lines of credit. An airplane is a different piece of equipment. This is typically when our clients reach out to us is after they realize their local bank will be unable to perform.
I’ve seen buyers accept loan terms from their local bank at nearly a full percentage point above what aviation-focused lenders were offering on the same type of deal. On a $1.2M aircraft over 15 years, that can be real money.
Why it’s costly: A bank unfamiliar with aviation lending may undervalue the collateral, apply overly conservative loan-to-value ratios, offer shorter terms, or price in risk that an aviation-specialist lender wouldn’t. Because your cost of capital is higher, you end up paying more for the same aircraft.
How to avoid it: Work with a finance specialist who focuses exclusively on aviation who can access a network of 50+ lenders – banks, credit unions, and specialty aviation lenders who compete for your business. That competition is what drives your rate down and your terms up. Your local bank doesn’t have that problem since they’re the only option on the table.
Mistake #3: Ignoring the Total Cost of Ownership
This one is where excitement gets buyers into trouble. They find an aircraft, they run the math on the loan payment, it looks manageable, and they go for it. What they forgot to factor in is everything else.
And “everything else” is substantial.
Depending on the aircraft, you’re looking at:
- Insurance: $15,000 to $100,000+ per year, depending on aircraft type, pilot experience, and how the aircraft will be used
- Hangar: $500 to $5,000+ per month depending on location and aircraft size
- Maintenance reserves: Turbine aircraft require setting aside money monthly for scheduled inspections and engine reserves – often $500 to $2,000+ per hour flown
- Fuel: A business jet burning 200 gallons per hour at $6/gallon adds up fast
- Pilot costs: If you need a professional pilot, add salary, benefits, and training
- Aircraft management: If you’re using a management company, budget 10-15% of revenue (or a flat monthly fee)
I’ve talked to buyers who were genuinely surprised that their annual operating costs were higher than their annual loan payment. That’s not a rare situation – it’s actually pretty common at the turbine level.
Why it’s costly: Underestimating total cost of ownership leads to cash flow problems, deferred maintenance (which becomes a safety and resale issue), and sometimes a forced sale at the worst possible time.
How to avoid it: Before you commit to a purchase price, model the full picture. A good transaction team including a trusted aircraft broker and an aircraft finance professional will help you think through these numbers – not just the loan. If the total cost of ownership doesn’t fit your financial picture, it’s better to know that before closing than after. Consult softwares like AviaCost to accurately calculate cost data.
Mistake #4: Choosing the Wrong Financing Structure for Your Mission
This mistake is subtle, but the wrong structure can cost you as much as a bad rate.
A buyer planning to put an aircraft on Part 135 charter took out a standard 20-year loan. High-utilization charter can put 500+ hours per year on an airframe – the aircraft depreciates far faster than a 20-year amortization assumes. By year seven, his loan balance exceeded the aircraft’s market value. Upside down, with no clean exit.
On the flip side: a business buyer who takes a term loan when a capital lease would have provided dramatically better tax treatment, especially with 100% bonus depreciation reinstated in 2025. He paid taxes he didn’t have to pay because the structure didn’t match his situation.
Why it’s costly: Loans, leases, and operating leases each have different implications for your balance sheet, tax exposure, and flexibility. Getting this wrong is expensive and hard to unwind.
How to avoid it: Match your financing structure to your mission, usage rate, and tax situation – ideally with your tax advisor and finance partner in the same conversation. If you’re new to this, our first-time buyer guide covers the foundational framework.
Mistake #5: Rushing the Closing Process
Everyone is excited to get the deal done. I get it – you’ve found the right aircraft, the price is agreed, and you want to be flying. But closing is where a lot of expensive mistakes happen when buyers try to compress the timeline.
The most common closing mistakes I see:
Changing the ownership structure mid-process. A buyer starts the loan application as an individual, then decides they want to take title in an LLC, then their attorney suggests a trust. One of my favorites happens specifically in an S-Corp, where the borrower creates basis by borrowing the money individually and then writing a subrogation agreement to their S-Corp. Lenders often lose their mind at these. Every change resets the underwriting clock. Some lenders won’t accommodate late-stage structure changes at all. Plan your ownership structure before you apply.
Not coordinating with your tax advisor on timing. It’s important that you put the aircraft into service during the same year as you are taking depreciation. This means, especially for fourth quarter buyers, closing with plenty of time before the end of the year to take your business flights.
Not budgeting for closing costs. Escrow fees, FAA registration, International Registry, UCC filings, legal review, doc stamps – these add up. Budget $3,000–$8,000+ depending on the transaction, and don’t let it be a surprise. This is also why its important for everyone to communicate where the closing will take place, because different states tax aircraft differently depending on where it closes.
Why it’s costly: A rushed closing can cause your deal to fall apart, push you past a rate lock expiration, or result in a structure that doesn’t reflect what you actually wanted. Sellers have walked away from delayed closings.
How to avoid it: Assemble your team early – lender, insurance broker, aviation attorney, and tax advisor. A smooth closing is almost always the result of a well-coordinated team that started working in parallel, not sequentially.
Bonus Tip: Don’t Overlook the Pre-Buy Inspection
This technically falls on the purchase side, not the finance side – but it affects your financing directly. A thorough pre-buy inspection at a reputable MRO can surface airframe issues that change both the aircraft’s true value and your lender’s willingness to fund. If you skip it or cut corners to close faster, you may be borrowing money to buy a problem.
Budget for a proper pre-buy. Do not waive it. Most lenders will require a copy of the pre purchase inspection before closing.
The Bottom Line
None of these mistakes come from bad intentions. They happen because buying an aircraft is exciting, the process moves fast, and most buyers are navigating it without anyone who’s done it a hundred times before.
Build your team before you start shopping. A great aviation finance specialist doesn’t just get you a loan – they help you avoid the landmines you can’t see until you step on them.
And if you want to keep learning, tune into The VIP Seat Podcast – Jessie Naor and I break down topics like these every episode, with real stories from the field.
Frequently Asked Questions
What is the most common aircraft financing mistake buyers make? Not getting pre-approved before shopping is the single most common mistake. It creates time pressure, weakens negotiating leverage, and leaves buyers uncertain about their actual budget. Pre-approval is free and takes the guesswork out of the process.
How much should I budget for aircraft closing costs? Plan for $3,000 to $8,000+ depending on the transaction. This includes FAA registration fees, escrow, UCC filings, document preparation, and legal review. Ask your lender for an estimate specific to your deal early in the process.
Does it matter which lender I use for an aircraft loan? Yes. Aviation lending is a specialty product. Lenders who focus exclusively on aircraft understand how to value the collateral, structure deals for different mission profiles, and offer competitive terms. General commercial banks often can’t match the rates and flexibility of aviation-specialist lenders.
What is total cost of ownership for an aircraft? Total cost of ownership includes the loan payment plus insurance, hangar, maintenance reserves, fuel, pilot costs, and management fees. Depending on the aircraft type, annual operating costs can equal or exceed the annual loan payment.
How early should I get insurance for an aircraft purchase? Start as soon as you have a signed purchase agreement. Aviation insurance can take 2–4 weeks – longer for high-value aircraft or buyers with limited type experience. Your lender requires proof of insurance before funding.
What happens if I change my ownership structure after applying for a loan? Any structure change – individual to LLC, LLC to trust – can reset the underwriting process and delay your closing. Decide on your ownership structure before you apply.
Ready to Get This Right?
I started Prestige Aircraft Finance because I’d seen too many buyers make avoidable mistakes – and pay for them. My job is to make sure you’re not one of them.
Whether you’re buying your first aircraft or your fifth, I’ll help you get pre-approved, shop the right lenders, model your total cost of ownership, and structure the deal to fit your mission and financial picture. You can also subscribe to Private Jet Insider for regular insights from inside the industry or listen to my podcast at The VIP Seat.
Contact Prestige Aircraft Finance to start a conversation. No pressure, no commitment – just a straight answer from someone who’s been doing this a long time.
Preston Holland is the founder of Prestige Aircraft Finance, a next-generation aviation finance firm headquartered in Chattanooga, Tennessee. He co-hosts The VIP Seat Podcast – the most popular business aviation podcast – alongside Jessie Naor, and authors the Private Jet Insider newsletter at prestonholland.com, with 26+ editions and 6,000+ LinkedIn followers. In 2025, he personally financed 31 transactions totaling over $150 million in aircraft purchase value. He serves on the board of GLADA, and Prestige Aircraft Finance is a member company of NAFA (National Aircraft Finance Association) and NBAA (National Business Aviation Association). His background in turnarounds and M&A gives him a sharp understanding of business valuation, cash flow dynamics, and how aircraft financing fits into broader financial strategy.