The simplest form is individual ownership. If a single individual is buying an aircraft , with the intention of registering it under their own name, the financing structure is straightforward . In this case, the individual is the owner of the aircraft and borrower on the loan, there is no separation between the two. Qualification for the loan is based on the individual’s credit and financial condition. Because there is no separation between the owner of the aircraft and the borrower on the loan, paperwork to tie the two together between the FAA and lender is minimal, which makes this structure simple to document and track. Adding your spouse to the ownership is just as easy and typically treated the same by lenders. In fact, adding your spouse may be helpful in qualifying if you are both earning income.
Next would be a partnership. A partnership consists of at least two individuals who are not spouses or domestic partners that will own the aircraft together. The simplest way to register the aircraft for this structure is to have each partner’s name listed as a co-owner of the aircraft. When applying for financing, lenders will often require that each partner qualify individually for the full loan amount. There are some lenders, however, that can rely on just one partner, or in some circumstances, combine the partners’ information to meet the loan requirements. The owner and borrower documentation for this structure is similar to that of an individual. When it comes to qualifying for the loan, it’s best to have a conversation with us up front to make sure you get lined up with the best financing option.
Individuals and partners can also register an aircraft through a Special Purpose Entity (SPE). Most lenders define an SPE as a separate entity established solely for the purpose of aircraft ownership, and require that it be owned directly by the individual or partners. This entity is often an LLC. In this case, the LLC will be the registered owner at the FAA. There will be some additional documentation needed to link the SPE to the individual(s) both for the FAA and for the lender. As long as the LLC is created only as an asset ownership entity, lenders will still rely on the personal credit and financial condition of the members of the LLC to qualify for the loan. The same rules for qualification apply here as they do for individual or partnership ownership structures.
If your intended ownership structure is one that includes multiple entities, or operating businesses that do more than just own the aircraft, the documentation and process becomes a little more complex. For example, if your LLC is the registered owner of the aircraft, and your LLC is owned by your S-corp, lenders will consider your LLC, your S-corp, and you as owners of the aircraft. This often results in the lender requiring the guaranty of each of these entities on the loan. The documentation needed for the FAA and for the lender in this case can get somewhat complex. Additionally, if you rely on any of these entities for income, the lender will require financial information on each of these entities to verify there is sufficient income and cash flow to qualify for the loan. This information typically includes business tax returns and current financial statements and debt schedules for each business involved.
In summary, the more layers there are between you and the registered owner of the aircraft at the FAA, the more likely it is that both the FAA and the lender will need additional documentation to complete the aircraft purchase. Personal guarantees are almost always required by lenders, and business guarantees are likely to be required any time the business is in the ownership chain, or if you own and rely on that business for your income. AOPA Finance has many lending options to consider, so whatever your intended ownership structure is, we’ll be happy to help you find the best lending option.
Great advice. Great rates. Helpful and responsive reps you can trust. Three good reasons to turn to AOPA Aviation Finance when you are buying or refinancing an airplane. If you need a dependable source of financing with people who are on your side, just call 800.62.PLANE (800.627.5263), or click here to request a quote.
