Owners and operators of U.S-registered aircraft are facing some expensive avionics mandates and upgrade requirements to meet new NextGen navigation standards. To help pay for these upgrades, the NextGen GA Fund was created to facilitate low-interest loans for individual aircraft owners and businesses that operate aircraft. The Fund is a result of legislation in the FAA Modernization and Reform Act of 2012.
The money available can be used for a variety of NextGen-related avionics upgrades, with a minimum amount of $10,000 and no maximum. Qualifying upgrades include Waas GPS, transponders, ADS-B out and in, RNP/Rnav, Fans/CPDLC, data comm, glass displays, antennas and the installation of these items. The funds can’t cover interior refurbishment costs but will be available for wiring associated with the avionics upgrades.
Interest rates vary and are tied to the 10-year T-bill, and once the loan package is processed the interest rate is locked. While the markup on the loan will vary depending on the creditworthiness of the applicant, said Michael Dyment, founder and managing partner of Nexa Capital Partners, which helped form the fund, “the interest rate will be lower than for a consumer loan.”
Loan Application Process
To begin the process of obtaining a loan, the applicant first needs to get a quote for the proposed work from an avionics shop (which must be an FAA-approved repair station). It is recommended that the applicant and the shop confirm that the proposed installation qualifies for funding under the NextGen GA Fund program. With quote in hand, the applicant fills out an online application form (available once the fund receives final approval for release of the money by the FAA and Department of Transportation sometime this year). The Aircraft Electronics Association website will host a portal for the NextGen GA Fund once the funds are released.
When the quote and application are received by the fund, its underwriting department will evaluate the application. “We can turn it around quickly,” said Dyment. Money will be released to the repair station so it can begin the job without tying up its own capital, but the final payment won’t be made until the job is signed off and completed.
The NextGen GA Fund does not plan to place a lien on the aircraft, unlike a commercial bank, he explained. “We’re not interested in a mortgage on the airplane.” In cases where credit history is a problem, the fund could hold a lien on the equipment.
The available funding starts with $550 million but that could grow if demand is high enough. Any owner or operator of a U.S.-registered aircraft, both fixed-wing and helicopters, can apply for a loan, including large fleet operators that might want to spread out their costs. All ages of aircraft are covered, too. Dyment doesn’t expect most owners of business jets to tap into the fund, but the money is available to them. “We think half of general aviation owners will need financing,” he concluded.