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DOCUMENTATION AND CLOSING
Typically, the basic documents required by the lender in an aircraft finance transaction include a promissory note, aircraft security agreement, guaranty and company authorization to enter into the transaction. The promissory note will contain the terms of the loan, as well as the promise from the debtor to repay the loan according to the terms set forth in the promissory note. The aircraft security agreement will grant a security interest in the aircraft in favor of the lender for the purpose of securing the obligations contained in the promissory note. It will often also contain the remedies available to the lender should the debtor fail to fulfill the obligations under the promissory note.
Depending on the results of the title search and whether the debtor is actually purchasing the aircraft at closing (as opposed to already owning the aircraft), other documents, such as a bill of sale or releases, will also be part of the documents required at closing.
In most instances, the parties will engage an aircraft title company or a law firm to act as escrow agent for the purpose of holding documents and funds to the order of the various parties. The terms of the escrow may be governed by a formal escrow agreement executed by the various parties and the escrow agent. The escrow agent should ensure that the necessary documents are received and completed to the satisfaction of the lender in order to perfect the security interest of the lender. At closing, the escrow agent will file documents with the FAA and, where applicable, complete registrations on the International Registry. Additionally, the escrow agent will wire funds to the applicable parties simultaneous with the filing of the documents. Although some of the escrow fees may be split with the seller, most of the costs associated with the financing transaction are typically paid by the debtor. These costs would include lender's legal fees, title search fees, recording and registration fees, title insurance premiums, appraisal fees, as well as other costs such as application fees.
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