What to Expect During the Aircraft Loan Closing Process: A Step-by-Step Guide

You've found the perfect aircraft, negotiated the price, secured financing approval, and completed the pre-purchase inspection. Now comes the final phase: closing the transaction. The aircraft loan closing process involves multiple parties, numerous documents, and careful coordination to ensure funds, title, and registration all transfer correctly. Understanding what to expect helps you navigate this process smoothly and avoid delays that could jeopardize your purchase.

Aircraft closings are more complex than typical consumer purchases because they involve federal registration (FAA), specialized title considerations, and coordination between buyer, seller, lender, and escrow company. Each party has specific requirements and timelines, and the closing can't proceed until all elements align.

This comprehensive guide walks you through every phase of the aircraft loan closing process. You'll learn what documents to prepare, how escrow and title searches work, what happens on closing day, and the post-closing steps required to complete your purchase. Whether you're a first-time buyer or experienced owner, this roadmap ensures you're prepared for a successful closing.

Your Pre-Flight Checklist: Assembling the Key Documents for a Swift Loan Closing

A smooth closing starts with thorough preparation. Having all required documents ready prevents delays and demonstrates to all parties that you're a serious, organized buyer. Here's what you'll need to assemble.

Documents You'll Provide

Personal identification: Government-issued photo ID (driver's license or passport) for identity verification. If purchasing through an entity, you'll also need entity documentation.

Proof of insurance: Your lender requires insurance coverage before funding. You'll need a certificate of insurance or binder showing:

• Hull coverage for at least the loan amount (often the purchase price)
• Liability coverage meeting lender minimums (typically $1 million+)
• Lender named as loss payee and additional insured
• Coverage effective date on or before closing

Down payment funds: Certified funds (cashier's check or wire transfer) for your down payment, typically due at or before closing. Personal checks are usually not accepted for large amounts.

Closing cost funds: Additional certified funds for your share of closing costs. Get a final closing cost estimate from escrow before preparing funds.

Entity documents (if applicable): If purchasing through an LLC, corporation, or trust, you'll need:

• Articles of organization/incorporation
• Operating agreement or bylaws
• Resolution authorizing the purchase and designating signers
• Certificate of good standing from the state
• EIN documentation

Documents the Lender Provides

Your lender will prepare and send closing documents for your signature:

Promissory note: Your promise to repay the loan according to specified terms. This document details the loan amount, interest rate, payment schedule, and consequences of default.

Security agreement: Grants the lender a security interest (lien) in the aircraft as collateral for the loan. This allows them to repossess the aircraft if you default.

FAA security agreement (AC Form 8050-98): The FAA-specific form that creates a recorded lien against the aircraft's registration.

Loan agreement: The comprehensive contract governing your loan relationship, including covenants (promises you make), representations, and conditions.

Truth in Lending disclosure: Required disclosure of loan terms, APR, total interest, and other consumer protection information.

Insurance requirements: Detailed specification of required insurance coverage throughout the loan term.

Documents from the Seller

The seller provides documents transferring ownership:

Bill of Sale (AC Form 8050-2): The FAA form transferring ownership from seller to buyer. Must be signed by the registered owner exactly as their name appears on the registration.

Aircraft logbooks: Complete airframe, engine, and propeller logbooks transfer to the buyer at closing.

Maintenance records: All supporting maintenance documentation, 337s, equipment lists, and other records.

Warranty assignments: If any warranties are transferable (avionics, recent overhauls), assignment documents transfer coverage to you.

Keys and access: All keys, lock combinations, hangar access credentials, and similar items.

Documents for FAA Registration

To register the aircraft in your name, you'll complete:

Aircraft Registration Application (AC Form 8050-1): Your application to register the aircraft. Must include your name and address exactly as you want them on the registration.

Evidence of citizenship: The FAA requires proof of U.S. citizenship or eligible status for aircraft registration. For individuals, this is typically a signed statement. For entities, additional documentation may be required.

Organizing Your Documentation

Create a closing file with:

• Copies of all documents you've signed
• Wire transfer confirmations
• Insurance certificates
• Correspondence with lender, escrow, and seller
• Pre-purchase inspection report
• Purchase agreement

Keep this file organized and accessible—you'll reference it throughout closing and want it for your permanent records.

Navigating the Escrow & Title Search: Clearing the Runway for Your Aircraft Purchase

Escrow and title services are essential safeguards in aircraft transactions. Understanding how they work helps you appreciate their value and navigate the process effectively.

The Role of Aircraft Escrow

An aircraft escrow company serves as a neutral third party that:

Holds funds securely: Your down payment and the lender's funds are held in escrow until all conditions are met. Neither buyer nor seller can access funds prematurely.

Manages document flow: The escrow company collects signed documents from all parties, verifies completeness, and coordinates filing with the FAA.

Ensures simultaneous exchange: Escrow ensures that title transfers and funds disburse simultaneously—the seller doesn't give up title until payment is assured, and the buyer doesn't pay until title is clear.

Handles FAA filings: The escrow company typically files documents with the FAA Aircraft Registry in Oklahoma City, ensuring proper recording of the sale and any liens.

Provides closing statements: Detailed accounting of all funds received and disbursed, documenting the financial aspects of the transaction.

Selecting an Escrow Company

Choose an escrow company that specializes in aircraft transactions. Key considerations:

• Aviation specialization: General escrow companies may not understand FAA requirements. Use companies that focus on aircraft.
• Experience: How many aircraft transactions have they handled? Do they have experience with your transaction type?
• Lender relationships: Your lender may have preferred escrow companies they work with regularly.
• Fees: Escrow fees vary. Get quotes and understand what's included.
• Communication: Responsive communication is essential during closing. Evaluate their responsiveness during initial contact.

Major aircraft escrow companies include AIC Title Service, Insured Aircraft Title Service (IATS), and several others specializing in aviation transactions.

Understanding the Title Search

A title search examines FAA records to verify ownership and identify any claims against the aircraft:

Ownership verification: Confirms the seller is the registered owner with authority to sell. Identifies any co-owners or entity ownership structures.

Lien search: Reveals any existing loans, security interests, or other liens against the aircraft. These must be satisfied (paid off) before clear title can transfer.

Chain of title: Reviews the history of ownership transfers to identify any gaps or irregularities that could indicate problems.

Legal claims: Identifies any judgments, tax liens, or legal actions that could affect the aircraft.

Registration status: Verifies current registration is valid and identifies any issues with the aircraft's registration history.

Title Insurance

Title insurance protects against losses from title defects not discovered in the search:

What it covers: Undiscovered liens, forged documents, errors in FAA records, and other title defects that could affect your ownership.

Who requires it: Most lenders require title insurance to protect their security interest. Buyers may also purchase owner's coverage.

Cost: Title insurance is a one-time premium, typically $300-$800 depending on aircraft value and coverage amount.

Duration: Coverage continues as long as you own the aircraft (or for lenders, as long as the loan is outstanding).

Resolving Title Issues

Title searches sometimes reveal issues requiring resolution:

Existing liens: The seller must pay off existing loans and obtain lien releases. The escrow company typically handles payoff directly from sale proceeds.

Documentation gaps: Missing bills of sale or registration gaps may require affidavits or additional documentation to establish clear chain of title.

Name discrepancies: If the seller's name doesn't match registration exactly, corrective documents may be needed.

Unreleased liens: Sometimes old liens weren't properly released even though the debt was paid. Obtaining releases from previous lenders can take time.

Most title issues can be resolved, but they take time. Build buffer into your closing timeline for potential complications.

The Final Approach: What to Expect on Closing Day & How to Ensure a Smooth Landing

Closing day is when all the preparation comes together. Understanding what happens helps you navigate the day smoothly.

Before Closing Day

Final walkthrough: If possible, inspect the aircraft one final time before closing to verify condition matches your expectations and nothing has changed since the pre-purchase inspection.

Confirm funds: Verify your wire transfer has been sent and received by escrow. Confirm the exact amount needed and that funds are available.

Review documents: Read all closing documents before signing day. Ask questions about anything unclear. Don't wait until you're sitting at the closing table.

Confirm insurance: Verify your insurance is bound and the certificate has been sent to the lender and escrow company.

Coordinate logistics: Confirm closing time and location (often done remotely via overnight documents or electronic signatures). Arrange for aircraft pickup or delivery.

The Closing Process

Aircraft closings typically happen in one of three ways:

In-person closing: All parties meet (often at the escrow company's office) to sign documents simultaneously. Less common for aircraft due to geographic distances.

Mail-away closing: Documents are sent to each party for signature and returned to escrow. Once all signed documents are received and verified, closing proceeds.

Electronic closing: Increasingly common, using electronic signature platforms. Documents are signed digitally, though some FAA forms still require wet signatures.

Document Signing

You'll sign numerous documents at closing:

• Promissory note (your promise to repay)
• Security agreement (granting lender a lien)
• FAA security agreement
• Loan agreement
• Aircraft registration application
• Various disclosures and certifications

Signing tips:

• Sign exactly as your name appears on documents
• Use blue ink (distinguishes originals from copies)
• Initial where indicated
• Date documents with the actual signing date
• Don't leave any signature lines blank

Funds Disbursement

Once all documents are signed and verified, escrow disburses funds:

• Seller receives sale proceeds (minus any payoffs and fees)
• Existing liens are paid off directly by escrow
• Escrow fees, title insurance, and other costs are paid
• Any prorated amounts (hangar rent, insurance) are adjusted

The escrow company provides a detailed closing statement showing all disbursements.

Document Filing

After closing, documents are filed with the FAA:

• Bill of Sale (transfers ownership)
• Your registration application
• Lender's security agreement (creates recorded lien)
• Any lien releases from previous loans

The escrow company typically handles FAA filing, often using expedited services to ensure prompt recording.

Cleared for Takeoff: Post-Closing Steps from FAA Registration to Final Funding

Closing isn't quite the end—several post-closing steps complete your purchase and prepare you for ownership.

FAA Registration Process

After documents are filed with the FAA Aircraft Registry:

Temporary registration: You'll receive a temporary registration certificate (pink slip) allowing you to operate the aircraft while permanent registration is processed. This is typically valid for 90 days.

Permanent registration: The FAA processes your registration and issues a permanent Certificate of Aircraft Registration (white certificate). Processing typically takes 4-8 weeks but can be longer during busy periods.

Registration card: Keep your registration certificate in the aircraft at all times—it's required for legal operation.

Lien Recording

Your lender's security interest is recorded with the FAA:

Recording confirmation: The escrow company or lender will provide confirmation that the security agreement has been recorded, protecting the lender's interest.

Conveyance number: Each recorded document receives a conveyance number for reference.

Insurance Finalization

Policy issuance: Your insurance binder converts to a full policy. Review the policy to ensure coverage matches what you requested.

Premium payment: If you haven't already paid the full premium, arrange payment according to your policy terms.

Lender notification: Ensure your lender is properly listed on the policy as loss payee and additional insured.

Loan Servicing Setup

Payment setup: Establish how you'll make loan payments—automatic withdrawal, online payment, or check. Set up automatic payments if offered to avoid missed payments.

First payment date: Note when your first payment is due. There's often a grace period after closing before the first payment.

Lender contact information: Know how to contact your lender for questions, payment issues, or to request payoff information.

Aircraft Transition

Physical possession: Arrange to take possession of the aircraft. This may involve a ferry flight, pickup at the seller's location, or delivery to your home base.

Logbook review: Thoroughly review all logbooks and records you received. Verify everything is present and organized.

Squawk list: Note any items from the pre-purchase inspection that need attention and schedule maintenance accordingly.

Familiarization: If this is a new aircraft type for you, arrange for transition training before flying extensively.

Administrative Tasks

Hangar/tiedown: Arrange for aircraft storage at your home base if not already done.

Database subscriptions: Transfer or establish navigation database subscriptions (Garmin, Jeppesen, etc.).

Maintenance relationship: Establish a relationship with a maintenance shop for ongoing care.

Records organization: Set up a system for organizing maintenance records, expense tracking, and other ownership documentation.

For more information on the aircraft buying process, see our closing process guide and FAA registration guide.

Frequently Asked Questions

Disclaimer: This article provides general information about the aircraft loan closing process and should not be considered legal or financial advice. Closing procedures vary by transaction, lender, and jurisdiction. Always work with qualified professionals—including aviation attorneys, escrow companies, and lenders—for your specific transaction.