Question: I have been offered a loan to pay part of the overhaul on a TSIO-520-F, and purchase of a new prop. It's a personal loan to me, to pay for equipment going onto a company-owned aircraft. How do I protect the lender, and attach the loan to the equipment?
Answer: What you’re describing is very similar to a Home Equity Line of Credit. Unfortunately, in the aviation finance world these are by and large not allowed (unless it’s an additional loan from the existing lender). The challenge comes when the new lender tries to protect their position by filing an “attachment” or lien on the aircraft. Virtually all aircraft finance loan documents will explicitly forbid it as lenders don’t want to get into a legal battle of who has rights to the plane.
The only way to protect the original lender is to ensure that nothing is filed against the plane and that it is in fact just a personal loan to you with no recourse to the business or its asset(s) (the plane).
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