A Few Good Questions to Ask When a Customer Seeks Financing for an Aircraft

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An eight-seat Pilatus PC-12 turboprop or a six-seat Eclipse 500 jet, both of which were manufactured in 2008, can be purchased for less than $1.5 million. These are just two examples from a fleet of aircraft options available that can quickly reach locations not served by commercial air traffic. The economics of small business aircraft travel are such that independent community banks in Washington will likely receive a greater number of requests to assist their customers in financing business aircraft purchases.

Financing an aircraft ought to be of mutual benefit for both the bank and the customer. It is generally a straight-forward process: the customer executes a note and security agreement, and the bank records the security agreement with the Aircraft Registry maintained by the Federal Aviation Administration (“FAA”). If the aircraft can carry eight or more passengers, or has engines with a certain thrust rating, the bank also registers its interest (an “international interest”) with the International Registry (“IR”) of Mobile Assets, in Dublin, Ireland. Once the loan is paid off, the bank cancels its security agreements with the FAA and IR, and the relationship regarding that particular aircraft successfully concludes.

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Topics:  Aircraft, Aircraft Sales, FAA

Published In: Finance & Banking Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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