Aircraft Loan Documents: A Document-by-Document Guide to the Closing Package

This is a reference for buyers and refinancers who have a closing package in front of them. It explains what each document does, who signs it, where it gets filed, and what to check before you sign.

The aircraft loan closing package at a glance

Entity borrowers also provide formation documents, such as articles of organization, the operating agreement, a resolution or certificate authorizing the signer, and often a certificate of good standing.

Promissory note: your promise to pay

The note is the debt itself. Everything else in the package secures or supports it. It is usually short, so read every line.

What to check:

• Principal, rate and payment. Check the payment against an independent calculation. For example, $170,000 at 7.75% over 240 months should be $1,396 a month. If the note says something different, ask why.
• Fixed or variable. If variable, find the index (for example, Prime or SOFR), the margin, the reset dates, and any caps or floors. See fixed vs variable aircraft loans.
• First payment date and maturity date. A maturity date earlier than the amortization implies means a balloon. On $170,000 at 7.75% with 20-year amortization and a 5-year maturity, about $148,268 would be due at month 60. The note should state the amount. See how to evaluate an aircraft balloon loan.
• Late charge and grace period. Work out the dollar amount. If a note set the late fee at 5% of the payment, a late $1,396 payment would cost $70.
• Prepayment. Is partial and full prepayment allowed without penalty? If there is a penalty, how is it calculated and when does it step down?
• Default rate. What rate applies after a default or after maturity?
• Joint and several liability. With co-borrowers, each is typically liable for the full debt.

Aircraft security agreement: the lender's lien

The security agreement gives the lender a security interest in the aircraft and sets the rules you agree to while the loan is outstanding. The FAA publishes an optional sample, AC Form 8050-98. Many lenders use their own longer forms instead.

To be recorded, the FAA Registry requires the original agreement to name the parties, grant a security interest, identify the collateral by make, model, serial number and N-number, and carry the debtor's ink signature. The recording fee is $5.00 per item of collateral (aircraft, engine, propeller or spare-parts location). On a typical piston single, the recorded collateral is usually just the aircraft.

What to check:

• Collateral description. Make, model, serial number and N-number must match the data plate and the FAA registry record exactly. One wrong digit can delay recording.
• Insurance covenant. Required hull amount, liability limits, and the lender's position on the policy (see the insurance section below).
• Maintenance and airworthiness. Usually requires airworthy condition, current inspections and AD compliance, and may give the lender inspection rights.
• Location and geography. Many agreements limit operation to the U.S., or require notice or consent before flights abroad. If you fly to Canada, Mexico or the Bahamas, get it addressed in writing.
• Use restrictions. Leaseback, flight-school use, rental and charter (Part 135) are often restricted or need consent. If you plan any of them, negotiate before signing.
• Transfer and liens. No sale, lease or additional lien without the lender's consent.
• Events of default and cure periods. Look for reasonable notice and cure periods, and watch for broad triggers such as "lender deems itself insecure" and cross-default clauses tied to other debts.
• Remedies. Acceleration, repossession, sale and any deficiency liability.

For a deeper treatment of collateral covenants, see aircraft collateral and security agreements. For how the FAA Registry protects the lender's priority, see the FAA Registry and aircraft loan security.

Personal guaranty

When an LLC or corporation borrows, lenders commonly ask the owners to guarantee the loan personally, because the entity often has no assets beyond the airplane.

What to check: whether the guaranty is unlimited or capped; whether it is "continuing" (covers future modifications and extensions); what defenses it waives; whether it can be released after a period of on-time payments or a lower balance; and who else must sign. More in co-signers and guarantors.

UCC-1 financing statement

The lender's interest in the aircraft itself is recorded at the FAA Registry. Lenders often also file a UCC-1 with the state where the borrower is located or organized, typically to cover related property such as logbooks, spare parts and insurance proceeds, or simply as a backstop. Practices vary by lender.

What to check: that the debtor name exactly matches your legal name or the entity's registered name, and that the collateral description is limited to the aircraft and related property, not "all assets" of an operating business, unless you agreed to that. At payoff, ask for a UCC-3 termination.

Insurance evidence: loss payee and endorsements

Before funding, the lender needs proof that the aircraft is insured and that the lender is protected on the policy. Expect requirements such as:

• Lender named as loss payee on hull coverage, so hull claim payments go to the lender to the extent of its interest.
• Lender named as additional insured on liability coverage (often required).
• Breach-of-warranty endorsement, which protects the lender's interest even if the owner breaches the policy's terms.
• Notice of cancellation to the lender a set number of days before the policy lapses or changes.
• Hull value at or above the amount the lender requires, often tied to the loan balance or aircraft value.

What to check: the pilot warranty (named pilots and minimum experience) and the territory limits. Flying outside them can leave both you and the lender uninsured. See aircraft insurance requirements.

FAA Aircraft Bill of Sale (AC Form 8050-2)

On a purchase, the seller signs the FAA bill of sale conveying the aircraft to you. It is filed with the FAA Registry along with your registration application. It is not needed on a refinance unless ownership changes.

What to check:

• The seller's name matches the current registered owner exactly. If the seller is an entity, the signer's title and authority must be shown.
• The purchaser name matches exactly how you will register: individual, co-owners or the LLC's full legal name.
• Make, model, serial number and N-number match the aircraft and the registry.
• The title search shows a clean chain of title, with every prior lien released. See aircraft lien searches.

Aircraft Registration Application (AC Form 8050-1) and the pink copy

The registration application puts the aircraft in the new owner's name. The fee is $5.00 (14 CFR 47.17), and the certificate is valid for seven years from the end of the month it is issued (14 CFR 47.40).

The second copy of the application, the "pink copy", is temporary authority. Under 14 CFR 47.31(c), it is valid for operation within the United States until you receive the certificate or the FAA denies the application. It is not valid outside the U.S., it is not available once 12 months have passed since the first application after the ownership transfer, and it requires an assigned N-number. The old 90-day limit no longer applies.

What to check: type of registration (individual, co-ownership, LLC or corporation), names and mailing address, and that the pink copy is carried in the aircraft until the certificate arrives. See the FAA registration guide.

Conveyance Recordation Notice (AC Form 8050-41) and lien releases

After the FAA records a security agreement, it returns AC Form 8050-41, the Conveyance Recordation Notice. It is the FAA's confirmation that the lien is on record, and it has a release section. When the loan is paid off, the lender signs the release and sends it to the FAA. A signed release letter is also acceptable.

What to check:

• At closing, confirm the recording information for the new lien once the lender receives the notice.
• At payoff, get written confirmation that the release was sent. Before you sell, run a title search to confirm it was recorded.
• On a purchase or refinance, make sure every prior lender's release is in hand, or is a funded condition of escrow, before money moves.

International Registry (Cape Town): usually not in a piston package

The Cape Town Convention applies only to airframes type-certificated for at least eight persons including crew, or more than 2,750 kg (6,050 lb) of goods, and to engines of at least 550 rated takeoff horsepower. Most piston singles and light twins fall below these thresholds. When it does apply, the FAA Registry is the entry point, using AC Form 8050-135.

Worked example: FAA fees on a typical piston purchase

A buyer finances a piston single with a $170,000 loan. The FAA charges $5.00 to register the aircraft (AC Form 8050-1) and $5.00 to record the security agreement against one collateral item, the aircraft. That is $10 in FAA fees. Everything else, including the title search, escrow, lender documentation fee and any attorney review, is set by the providers you use. Ask for each in writing before closing.

Closing-package review checklist

• Note: amount, rate, payment (independently checked), maturity, any balloon, late fee, prepayment and default rate.
• Security agreement: collateral identifiers match the data plate and registry; geography, use restrictions and cure periods fit how you'll fly.
• Guaranty: cap, duration and release terms understood.
• UCC-1: correct debtor name; collateral limited to what you agreed.
• Insurance: lender endorsements in place; pilot warranty covers every pilot who will fly.
• Bill of sale and registration: names match exactly; pink copy in the aircraft.
• Releases: every prior lien released or conditioned in escrow; you know how your own lien will be released at payoff.
• Copies: a complete signed set for your records.

An aviation attorney's review is optional but worthwhile for unusual terms, entity ownership, leasebacks or international use. It is especially worth it when a guaranty or cross-default clause is involved.

How this guide differs from related guides

This page is a document-by-document glossary. For the sequence of steps from approval to funding, see the aircraft loan closing process or the shorter closing process explained. For escrow mechanics, see aircraft title and escrow. For the role of the FAA in ownership and liens, see the FAA's role in aircraft financing.

Frequently asked questions