Corporate Aircraft Finance Options Compared

The short answer

A company can acquire a business aircraft with cash, a secured aircraft loan, a finance lease, an operating lease or a sale-leaseback, or share one through co-ownership, joint ownership or a fractional program. The right choice depends on how many hours the company will fly, whether it wants to carry residual value risk, its cash and tax position, and how the aircraft will be operated under FAA rules. NBAA notes full ownership generally makes sense at roughly 250 flight hours a year or more.

Key takeaways

Financing choice and operating structure go together: who owns the aircraft and who has operational control both matter to lenders and the FAA.
Loans and finance leases leave the company with residual value risk; operating leases pass it to the lessor.
NBAA notes full ownership generally makes sense at roughly 250 flight hours a year or more; below that, shared ownership or charter may fit better.
Under 14 CFR 91.501(b)(5), a company can carry its own officials, employees, guests and property on its aircraft under Part 91 when the flight is incidental to its business and charges stay within allowed costs.
Ownership entity, guarantees and tax depreciation should be settled with aviation counsel and a tax advisor before signing.

What are the options for financing a corporate aircraft?

There are two decisions in any corporate aircraft acquisition: how to pay for the aircraft, and how to own and operate it. The payment options are:

Corporate aircraft finance options compared
Option	Who owns it	Residual value risk	Best fit
Cash purchase	Company	Company	Strong liquidity and a better use of cash is not available
Secured aircraft loan	Company or its aircraft entity	Company	Long-term use, wants ownership and depreciation
Finance lease	Lessor, then company	Company	Wants ownership with lower entry cash or lessor terms
Operating lease	Lessor	Lessor	Wants a fixed cost and the option to change aircraft
Sale-leaseback	Lessor, after buying from the company	Lessor	Already owns an aircraft and wants to release equity
Co-ownership, joint ownership or fractional share	Shared	Shared, by share	Lower utilization than a whole aircraft justifies

Each is explained below, along with the FAA operating rules that shape which ones work for a given company.

How does a corporate aircraft loan work?

A secured aircraft loan lends against the aircraft, with the lender's security interest recorded with the FAA and, for many turbine aircraft, the International Registry. For turbine aircraft, AOPA Aviation Finance describes standard terms as a 15-year amortization with a 5-year term, with down payments that could be as low as 10% depending on the aircraft, and offers fixed, floating and hybrid rate structures. That shorter term on a longer amortization leaves a balloon at maturity.

Lenders also look closely at value. Business Jet Traveler reported in 2022 that advance rates of 75% or 80% of the purchase price were not unusual, that some banks lent against an estimated market value lower than the price paid, and that lenders still sought prepayment penalties for the first several years. Bankers quoted in the same piece said skipping a pre-buy inspection was unacceptable. Read aircraft residual values and why lenders care for why value drives these terms, and estimate payments in the aircraft loan calculator.

A loan keeps ownership, and with it the tax depreciation, with the company. Business Jet Traveler noted that you can take depreciation only on an aircraft you own. Depreciation rules, including bonus depreciation and business-use requirements, are set out in IRS Publication 946; confirm how they apply with your tax advisor.

When does a lease suit a company better than a loan?

NBAA describes leasing as an alternative to outright purchase for reasons ranging from practicality to cash flow. The two main types work differently:

Finance lease: designed to end in ownership, often with a fixed or nominal buyout. It behaves much like a loan, and the company carries residual value risk. See aircraft finance leases.
Operating lease: the company uses the aircraft for part of its life and hands it back. The lessor carries the residual risk and may reflect its own tax depreciation in pricing, as Business Jet Traveler noted. Return conditions and maintenance reserves matter as much as the rent. See aircraft operating leases.

Most financing leases are dry leases: the company provides crew and holds operational control. NBAA notes that if at least one crew member is provided with the aircraft it becomes a wet lease, which without an exemption requires an FAA commercial operating certificate. The dry lease vs wet lease vs finance lease guide explains the difference.

What about a sale-leaseback of an aircraft the company already owns?

A company that owns an aircraft outright, or with substantial equity, can sell it to a lessor and lease it back. The company keeps flying the same aircraft, turns equity into cash, and passes residual value risk to the lessor. The cost is a lease payment for the life of the lease and loss of the upside if the aircraft holds value. The sale-leaseback guide and the sale-leaseback calculator walk through the math.

What if the company will not fly enough to own a whole aircraft?

NBAA notes full ownership generally makes sense at roughly 250 flight hours a year or more, though some companies buy aircraft at lower utilization. Below that, shared structures spread the fixed costs:

Co-ownership: NBAA describes multiple companies sharing ownership of an aircraft, with each providing its own flight crew. Co-owners cannot charge each other for operating the aircraft.
Joint ownership: under 14 CFR 91.501(c), one of the registered joint owners employs and furnishes the crew, and each owner pays a share of the costs set in the agreement.
Fractional ownership: a share of an aircraft in a program managed under Part 91 Subpart K. NBAA notes a minimum interest of 1/16th of an airplane or 1/32nd of a helicopter.
Charter or jet cards: no ownership at all, which avoids residual risk but gives up control of the aircraft.

Shared ownership can be financed too, but lenders will need to understand every owner, how costs are split and what happens if an owner exits.

How do FAA operating rules affect the financing choice?

A corporate aircraft normally flies under Part 91, without an air carrier certificate, which limits what the company can charge for flights. 14 CFR 91.501(b)(5) allows a company to carry its own officials, employees, guests and property on an airplane it operates when the flight is incidental to its non-aviation business and charges stay within the limits the rule sets. The same section allows time sharing, interchange and joint ownership arrangements on large and turbojet multiengine airplanes, each with its own cost limits.

These rules matter for financing because lenders want to know who operates the aircraft and how it earns or recovers costs. If the company plans to place the aircraft on a charter certificate to offset costs, lenders typically price that as commercial use, with shorter terms and lower advance rates. Our guide to financing a Part 135 charter aircraft covers that case.

Should the aircraft be owned by the company or a separate entity?

Many companies own aircraft through a separate entity, often an LLC, to keep the asset and its liabilities apart from the operating business. That can work well but creates operating-rule questions, because an entity that only owns the aircraft is not itself a business that the flights are incidental to. The structure must still fit the Part 91 rules above. Lenders will usually ask for guarantees from the operating company or its owners when the borrower is a special-purpose entity. Settle the structure with aviation counsel and a tax advisor before closing, because changing ownership later often requires a refinance.

How should a company choose?

Estimate realistic annual hours and the trips the aircraft must fly.
Decide whether the company wants to carry residual value risk.
Compare after-tax cost of a loan, finance lease and operating lease with your tax advisor.
Fix the operating structure first: who owns, who operates, and what can be charged.
Get lender and lessor quotes on the same aircraft, use and hours.
Plan the exit: resale, lease return or balloon refinance.

The business aircraft financing guide lists what lenders ask corporate borrowers for. This article is general information, not tax or legal advice. When you are ready to compare structures on a specific aircraft, you can start a deal file with JetFinex.

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Frequently asked questions

What are the main ways to finance a corporate aircraft?

Cash, a secured aircraft loan, a finance lease, an operating lease and a sale-leaseback of an aircraft already owned. Companies that fly fewer hours may share an aircraft through co-ownership, joint ownership or a fractional program instead.

Is it better for a company to lease or buy a business jet?

Buying or using a finance lease suits a company that will fly the aircraft for years and is comfortable carrying residual value risk. An operating lease suits one that wants a fixed cost, flexibility to change aircraft and no exposure to resale value. See the aircraft lease vs buy guide.

How many hours a year justify owning a corporate aircraft?

NBAA notes full ownership generally makes sense at roughly 250 flight hours a year or more, though some companies buy aircraft at lower utilization.

Can a company charge employees or affiliates for flights on its aircraft?

Only within the limits of the FAA rules. 14 CFR 91.501 allows certain cost recovery for company carriage, time sharing, interchange and joint ownership arrangements. Charging beyond those limits can turn a flight into an illegal charter. Ask aviation counsel.

Do lenders finance aircraft owned by an LLC?

Yes, many corporate aircraft are owned by a special-purpose entity. Lenders usually want to understand who operates the aircraft, who pays for it, and may ask for a guarantee from the operating company or its owners.

Sources

This guide is educational and is not tax, legal or investment advice. See our editorial standards and disclosures. Spot an error? Tell us.

Corporate Aircraft Finance Options: Loans, Leases and Shared Ownership