Monday, January 4, 2016

General Aviation Aircraft Loan Closing Process

Once an aircraft loan has been approved by your aircraft lending source, you will need to provide them with information on the collateral such as an Aircraft Specification Sheet, recent aircraft pictures, copies of various logbook entries including verification of a current Annual Inspection, pre-purchase inspection signed by an A & P mechanic or FAA approve Repair Facility, and a title search from a recognized title & escrow company in Oklahoma City, OK.
Once it’s determined a particular aircraft is being purchased, the lender will request address information regarding how an owner desires to register the aircraft (cannot be a P.O. Box unless accompanied by a physical address too) and addresses where to send routine mail out to along with overnight location of delivery if different from the aircraft registration address.
Loan documents are prepared and generally include a Note which outlines the interest rate, term, loan proceeds amount, etc., a Security Agreement which gets filed with the FAA to place the lien on the aircraft, an Agreement to Provide Insurance Form, Loan Disbursement Form, an Errors & Omissions Power of Attorney Form, and possibly a few other misc. lender items.
Once the lender has receive all original signature loan documents back from the customer and the title company confirms there are either no liens on record and/or they have all original signature lien release(s) in escrow along with an original Aircraft Registration 8050-1 Form, FAA Bill of Sale(s) and lender’s Security Agreement, and possible other misc. items, and the down payment funds have been received in full, then a closing/funding may take place.
Fundings are almost exclusively accomplished via a wire transfer to the title company or seller if no title company is involved.  The buyer will send a final authorization request to the lender for final disbursement. Wires cannot be sent out on weekends, late afternoons or evenings due to wire cut-off times as the Federal Reserve must be open for transfers.