For first-time aircraft buyers, it can be challenging to navigate the jet financing process. Buyers and stakeholders expect clarity on what they are signing up for – critical information given the dollar amounts at play. At JSSI Aviation Capital, managing client expectations – and going above and beyond to provide resources throughout the process – is always a priority when working through a potential deal.

We’ve collected a list of useful standard terms and definitions specifically helpful for a new buyer before they start this process. This helps speak the same language as your financing partner, ask the right questions, and make a more informed financing decision for your specific operation:

• Lender – The entity who funds the purchase in a loan structure. They do not own the aircraft, but typically have some security in the event the borrower stops paying.
• Borrower – The entity borrowing the funds for aircraft purchase or refinance. They own the aircraft typically with an ownership claim on the asset held by the Lender.
• Lessor – The entity who owns the aircraft and places it out on lease.
• Lessee – The person or entity that the lease is granted to. The ones who hold possession of the aircraft during the duration of the lease.
• Guarantor –The person or entity who agrees to pay the debt if the Borrower or Lessee defaults.
• Financed Amount / Advance Amount – The amount of money borrowed from the Lender or Lessor. Usually expressed as a Loan-to-Value (LTV) ratio. For example, a 70% LTV financing on a $10 Million aircraft have a $7 Million financed amount.
• Down Payment / Owner Equity – Often the owner will be asked to pay in an amount for the purchase, with the rest being financed by the Lender / Lessor.
• Closing Fee – A fee paid to the lender when the loan / lease is funded.
• Amortization – How long it would take to pay the loan off given the monthly payments. Determined by how quickly the principal amount is paid back. For example, you can have a 5-year term with a 10-year amortization – meaning at year 5 you will still owe 50% of the financed amount.
• Ballon Payment / Jumbo Payment / Lump Sum Payment – Used to lower the monthly payments and extend amortization, the outstanding balance of the loan will not pay down to zero during the term. Instead, some amount, usually quoted as a percentage of the financed amount, will remain to either be paid at the end of the term or refinanced into a new loan.
• Prepayment Fee – A fee that lenders charge if you pay off a part or all of the loan early.
• Maintenance Programs – Lessee has the responsibility to keep the aircraft maintained. Most lenders will require the aircraft to be maintained on an engine maintenance program, such as JSSI’s hourly cost programs, to preserve aircraft values.
• Closing Cost Deposit / Good Faith Deposit – A deposit used to pay for expenses associated with closing the financing. This amount is typically required at signing of the term sheet and will most often be refundable (meaning less expenses incurred) if the Lender / Lessee determines they cannot fund the transaction for any reason.
• Aircraft Management – In many cases, a Lender will require and independent aircraft management company to handle operations, maintenance, and management of the aircraft. This is especially true for Asset-based financing. Some lenders can work around this requirement, but will require some additional security on the loan, for example personal or corporate guarantees and strong credit history.
• Utilization Limits – How much you fly your aircraft impacts its value. Most Lenders take aircraft operations into account when putting together terms, so if you fly more than anticipated the LTV can become higher over time. Most Lenders will require loan principal to be paid down for any flight hours above a set amount. This works to keep the LTV in check and allows the borrower to operate the aircraft as needed.
• Aircraft Registration – Lenders will require the aircraft to be registered in an approved jurisdiction. This can be based on geography, experience, or history. This needs to be weighed with the operations of the aircraft.

While this list covers a lot of the terms a client may hear in the process, this is not an exhaustive list of everything someone may come across in a financing deal. To learn more about these terms and the aircraft financing process, please reach out to JSSI Aviation Capital and we’re happy to walk you through the process.

JSSI Aviation Capital is dedicated to servicing individuals and companies who require asset finance alternatives outside mainstream lending options. The team has experience financing deals all over the world, from emerging markets in Asia and Africa to more mature markets like Europe and North America.

About JSSI
For more than 35 years, Jet Support Services, Inc. (JSSI) has been the leading independent provider of maintenance support, advisory services, software, and financial tools to the business aviation industry. With 6,000+ aircraft supported by maintenance programs and software platforms, JSSI leverages this wealth of data, scale, and innovation to drive cost savings and provide custom solutions that align to the interests of each client, regardless of make or model. Learn more at jetsupport.com.

JSSI products and services include:

Maintenance Programs. Hourly Cost Maintenance Programs to stabilize maintenance budgets, maximize aircraft availability and enhance residual value.

Parts & Leasing. Experienced product line specialized team who leverages our All-OEM inventory and global vendor relationships and go beyond parts sourcing to find optimal customer solutions.

Software: Traxxall and Conklin & de Decker. Powerful data platforms to help you make more informed decisions, from choosing the right aircraft to tracking your maintenance, inventory, and MRO projects.

Advisory Services. Objective insights and independent technical advice from a global team of technical advisors and ASA-accredited appraisers for virtually any business jet, turboprop or helicopter.

Aviation Capital. Customized asset-based finance solutions for business aviation.

Contact I JSSI Communications
Isabella Rimton [email protected]