Financing the purchase of an aircraft may seem the same as financing other business equipment, but there are key differences that, if disregarded, can cause major problems.
Ownership and Operating Structure impact Aircraft Finance
The ownership and operational structure for an aircraft must satisfy FAA, tax, and business goals, which at times can conflict. If you are financing an aircraft the structure must also be approved by the lender. Failing to take all these factors into consideration and decide upon the correct structure in advance, can lead to delays, extra costs, and potentially a future default under your financing agreement.
Consider the Details
The initial focus may be on the economics of the financing arrangement like the interest rate, down payment, and term, however attention must be paid to the details of the lender’s proposal. The terms for the lender’s security, financial disclosure, use restrictions, and other items can vary widely. Selecting the best rate without considering the other terms may result in a worse deal in the long run.
Gather the Right Team
Negotiating the financing arrangement for your aircraft should not be done in isolation. The financing arrangement will impact legal, tax, business, and operational goals for the aircraft. Representatives with expertise in each of these areas should be included, so that key requirements are not overlooked.
Plan Ahead
The one constant in life is change. Even if the best deal has been negotiated, and your team has made sure that the financing agreement matches your needs, there needs to be some flexibility to allow for changes in key areas.
The attorneys at Jetstream Aviation Law can be a valuable member of your aircraft finance team, providing expertise in spotting and resolving the issues that may cause problems, to help ensure your aircraft financing meets your needs.
Michelle M. Wade is a partner with the law firm of Jetstream Aviation Law and counsels clients on the acquisition, financing and operation of corporate jets operated under Part 91 and Part 135 of the Federal Aviation Regulations. Jetstream Aviation Law can be found at www.JetstreamLaw.com
The information provided here is not legal advice and does not purport to be a substitute for advice of counsel on any specific matter. For legal advice, you should consult with an attorney concerning your specific situation.
