• Dallas (Principal Office)
  • (214) 780-1400
  • Home
  • About us
  • Contact
Purple Shackelford Logo-loresPurple Shackelford Logo-loresPurple Shackelford Logo-loresPurple Shackelford Logo-lores
  • Attorneys
  • Industries
  • Expertise
  • News
  • Home
  • About us
  • Contact

Aircraft Loan Documents: What To Expect

  • Home
  • News - Aviation Aviation Law Articles
  • Aircraft Loan Documents: What To Expect
Published by Greg Reigel at July 2, 2013

If you are financing the purchase of an aircraft, you know, or at least you should know, that the lender will have a number of documents for you to sign before it advances the funds. The loan documents typically associated with a basic aircraft finance transaction and required by a lender include a promissory note, aircraft security agreement, guaranty/pledge and authorization.

A promissory note contains the terms of the loan (e.g. amount, repayment schedule, interest rate etc.) and the borrower’s promise to repay the loan according to those terms. It also provides the lender with remedies if the borrower does not fulfill its obligations under the promissory note.

The aircraft security agreement pledges the aircraft as security for the promissory note. If the borrower fails to repay the promissory note, the lender will have the right to take possession of the aircraft. Once it has regained possession, the lender is able to sell or otherwise dispose of the aircraft to recover as much of the outstanding loan balance as possible. If the lender is able to sell the aircraft for more than is owed, the excess is paid to the borrower. However, after the lender offsets the amount received from sale against the outstanding balance and the lender’s costs/fees incurred in repossessing and selling the aircraft, it is unusual for an excess balance to exist.

For transactions in which the loan is being guaranteed by someone other than the borrower, that individual or business will need to execute a guaranty that obligates the guarantor to repay the loan in the event that the borrower defaults. If the borrower or any guarantor is a corporation or limited liability company, the lender will require that an appropriate official of the entity execute an authorization representing that the person executing the documents on behalf of the entity is authorized to sign and bind that entity.

Most lenders will have standard or form documents they use in aircraft finance transactions. However, depending upon the lender, the financial position of the borrower, the relationship of the borrower with the lender, and the amount of the loan, many of the terms in the loan documents may be negotiable. And it never hurts to have an aviation attorney review the documents on your behalf and negotiate any changes that may be required to protect your interests.

Share
Greg Reigel
Greg Reigel
Greg has more than two decades of experience working with airlines, charter companies, fixed base operators, airports, repair stations, pilots, mechanics, and other aviation businesses in aircraft purchase and sale transactions, regulatory compliance including hazmat and drug and alcohol testing, contract negotiation, airport grant assurances, airport leasing, aircraft related agreements, wet leasing, dry leasing, FAA certificate and civil penalty actions and general aviation and business law matters. Read Full Bio

Related posts

November 23, 2022

Arguments That Won’t Win A Drug Testing Refusal Case


Read more
October 13, 2022

When May A Private Pilot Receive Compensation For Operating An Aircraft “Incidental to Employment?”


Read more
September 16, 2022

Fly and Comply – Aviation Law with David Norton


Read more

Shackelford, Bowen, McKinley & Norton, LLP

Principal Office

Dallas
9201 N. Central Expressway
Fourth Floor
Dallas, Texas 75231

(214) 780-1400

Contact Us

Nashville
(615) 329-4440


Austin
(512) 469-0900


Fort Worth
(817) 887-8121

Frisco
(214) 780-1400


Houston
(832) 415-1801


Baton Rouge
(225) 610-1070

Shortcut Links

  • Home
  • About
  • Attorneys
  • Industries
  • Expertise
  • News
  • Contact
© Shackelford, Bowen, McKinley & Norton, LLP. All Rights Reserved. Handcrafted by
  • Home
  • About us
  • Contact