Coordinate operating authority, aircraft acceptance, insurance and working cash separately from financing approval. Compare the four financial structures on written terms, and model nonbillable flying and lower utilization before committing.
Start with the business and operating plan
Financing an aircraft for a proposed U.S. Part 135 charter operation requires an acquisition plan, an operating-authority plan and enough cash to support the business while the aircraft is unavailable or utilization is disappointing. A lender's approval addresses the proposed financing. It does not authorize charter flights, complete aircraft acceptance or establish customer demand.
Define the applicant, aircraft owner, intended operator, borrower and any guarantors. Identify whether the project is a new certificate, an aircraft addition to an existing operation, or an owner leasing an aircraft to another operator. Those arrangements can have different documentation, cash requirements and responsibilities. Ask the relevant advisers to use the same party names and proposed roles before comparing financial structures.
This guide covers regulatory coordination, four financing structures, the application process and a fictional cash example. It is a planning framework, rather than an operator certification determination, a loan offer or a professional accounting opinion. Start with the article library when additional aircraft, ownership or transaction questions need their own detailed review.
Coordinate certification, aircraft acceptance and operating costs
The FAA: current Part 135 certification process and AIS transition explains that initial Part 135 applications began transitioning to Aviation Integrated Safety Services on September 30, 2026. Its October 2026 page identifies pre-application, formal application, design assessment, performance assessment and administrative functions. Older resources may still refer to the former system. Use the FAA's current instructions when planning the application; a website article cannot promise a certification completion date.
Prepare a dependency schedule with actual decision owners. Acquisition, modifications, equipment, maintenance arrangements, manuals, staffing, training and insurance may each require work before the planned operation can begin. Record the prerequisite for each milestone and what evidence will establish completion. A signed purchase agreement and a projected launch date should not be treated as equivalent to an operating authorization.
FAA: Part 135 general certification requirements distinguishes requirements according to the certificate and operation, including management, aircraft, manuals and training arrangements. Do not assume every small operator has identical required management positions or that an existing operator's approval automatically covers a proposed aircraft or mission. Obtain a written account of the actual project and outstanding requirements from the responsible qualified team.
Maintenance also needs aircraft-specific treatment. 14 CFR 135.411: maintenance-program applicability distinguishes aircraft configured for nine or fewer passenger seats from those configured for ten or more and includes additional provisions and program choices. It does not support the claim that every Part 135 aircraft follows one identical maintenance program. Have the maintenance reviewer identify applicable requirements and the candidate's records before building the forecast.
Reconcile the resulting work list with cash timing. Which modifications must occur before the aircraft generates revenue? Who pays for conformity work, training flights and maintenance discovered during acceptance? How will the business fund a later launch? Obtain actual estimates and contingency decisions instead of using a universal certification-cost allowance as a substitute for project planning.
Insure the actual operation and clarify operational control
Build the insurance discussion around the actual owner, operator, aircraft, pilots, territory and use. FAA: Part 135 general certification requirements identifies insurance among the certification requirements, while the U.S. DOT: air-carrier liability insurance notice addresses aircraft accident liability insurance under Part 205. Applicable legal requirements, customer contracts and lender conditions are separate layers to reconcile. A generic liability amount or a private-use premium multiplier does not establish what this operation needs or what coverage is available.
Obtain written terms addressing the required lender interests, exclusions, training conditions and effective time. Distinguish an indicative premium from bound coverage. Coordinate insurance with the purchase and operating agreements, including who bears risk during positioning, inspection, modification and acceptance. Have the insurance professional explain how intended leased or managed use affects the proposed policy.
FAA Advisory Circular 91-37B: Truth in Leasing explains that operational control depends on the actual responsibilities and arrangements, not merely the lease's label. A dry lease and a wet lease are operational concepts that must not be confused with accounting classifications such as operating lease and finance lease. Have aviation counsel review who controls flights, supplies crew and carries the relevant responsibilities. Signing a financing lease does not by itself authorize a charter operation.
Make the operating arrangement understandable to everyone who must rely on it. The lender, insurer, operator and owner should be reviewing the same intended use. If a customer-facing sales arrangement changes after closing, reassess the relevant permissions rather than assuming the original financing and insurance documents cover every new activity.
Compare four financial structures on common assumptions
Traditional aircraft term loan
A purchase loan can provide ownership with debt secured under the actual documents. Compare principal, required equity, fixed or variable rate, fees, contractual maturity, amortization, prepayment provisions and any balloon. AOPA Finance: understanding loan terms explains why maturity and amortization deserve separate attention. A payment calculated over a long schedule may leave a substantial balance due earlier.
Review collateral descriptions, guaranties, financial reporting, restrictions on leasing or use, and remedies with the appropriate advisers. Do not infer nonrecourse treatment from the borrower's experience or aircraft value. Ask whether the proposal funds only the acquisition or also identified costs; amounts outside the advance still need a supported source of cash.
Operating lease
A proposed operating lease may let the business use an aircraft without buying it, but it creates its own commitments. Compare deposits, rent, escalation, maintenance obligations, usage limitations, reserves, insurance, permitted operators and return conditions. A low initial cash requirement may be offset by expensive return work or limitations on an intended operation.
Do not assume the lease stays off the balance sheet. FASB: costs and benefits of the leases standard explains Topic 842 recognition for operating as well as finance leases, with specified exceptions and presentation differences. This historical explanation is not a substitute for applying current accounting guidance to the actual entity and contract. Have the accountant evaluate classification and reporting before using an accounting advantage in the decision.
Finance lease
A finance-lease proposal requires the same close attention to payment timing, residual obligations and end options. Identify whether an option exists, whether exercising it is necessary for the business plan and how its price is determined. A finance lease should not be described as always containing a nominal purchase option; the specific documents control the proposed arrangement.
Keep tax ownership, financial reporting and aircraft operating authority distinct. Ask the tax adviser which party is entitled to any depreciation or other tax treatment in the actual structure. An accounting label alone should not be used to promise a deduction. Reconcile the cash comparison both with and without any tax benefit that has not yet been established.
Sale and leaseback
Selling an already owned aircraft and leasing it back can change the timing of capital available to the business. Evaluate net sale proceeds after payoff, transaction expenses and any applicable tax cash alongside the new rent, maintenance and end-of-lease commitments. Gross sale price is not the same as working capital retained after the transaction.
Have advisers determine whether the arrangement qualifies for the intended sale and accounting treatment and how existing restrictions affect it. Do not assume the seller retains the same operational responsibilities, or that every transaction produces the same depreciation result. Compare the business's future flexibility and total obligations as well as the immediate cash receipt. The leasing versus financing guide provides a broader comparison framework.
Prepare the application and closing file in stages
First, document the operating business. Identify existing authority and proposed changes, management experience, ownership, fleet strategy and the evidence behind expected demand. Distinguish flown history from customer expressions of interest. A letter without enforceable volume, timing and payment obligations should not be budgeted as guaranteed receipts.
Second, reconcile the financial packet. Use the actual provider's checklist for historical financials, tax information, debt, liquidity, ownership and projections. Explain unusual adjustments and changes rather than assuming that a lender accepts every proposed add-back. Identify the funds available for aircraft equity, initial work, deposits and working capital without counting the same cash twice.
Third, assemble the aircraft evidence. Include identity, configuration, records, inspection scope, known maintenance, projected component events and the intended operating arrangement. Obtain a current valuation or appraisal when the actual lender requires it. Resolve who pays for findings and what happens if the aircraft, insurance or operating plan is unacceptable before waiving transaction protections.
Fourth, compare written proposals using the same aircraft, assumed operating period and ownership horizon. Ask prospective providers whether they consider this transaction and request the actual conditions. A website's charter-financing article is not evidence that a particular lender has agreed to the project. Keep sensitive records in the channels agreed with the actual professionals and provider.
Finally, coordinate closing conditions. Confirm proper authority to sign, title work, insurance, final documents and funding instructions. Maintain a separate list of requirements for commencing the proposed operation. Closing the purchase while operational work remains can be a deliberate plan only when its costs, responsibilities and restrictions are understood; financing approval should not erase that remaining work.
Worked example: separate billable hours from total flying
Consider a fictional $4,000,000 aircraft purchase with $800,000 purchase equity and a $3,200,000 loan. Assume a fixed 7.5% nominal annual rate, monthly payments over 180 months, full amortization and no fees or balloon. The calculated monthly payment rounds to $29,664.40. Twelve rounded payments total $355,972.80. These figures illustrate loan mathematics, not available financing terms.
Assume other annual fixed cash spending of $480,000. Combined selected fixed spending and debt payments are $835,972.80. For the operating comparison, assume net receipts of $5,500 per billable hour after the deductions represented in that receipt figure. Assume total flown hours are 1.3 times billable hours and variable cash cost is $2,500 for every flown hour. The extra flying represents repositioning and other nonbillable use in this invented model.
Variable spending per billable hour is therefore $3,250, leaving $2,250 contribution before selected fixed spending and debt. The contribution must not be confused with the customer's advertised hourly price, accounting profit or cash already collected. Apply consistent definitions to receipts, commissions, taxes, fees and variable expenses when replacing these assumptions with actual evidence.
| Measure | 400 billable hours | 250 billable hours |
|---|---|---|
| Total flown hours | 520 | 325 |
| Net operating receipts | $2,200,000 | $1,375,000 |
| Variable cash spending | $1,300,000 | $812,500 |
| Contribution before fixed cash and debt | $900,000 | $562,500 |
| Selected fixed cash and debt | $835,972.80 | $835,972.80 |
| Remaining cash before excluded items | $64,027.20 | −$273,472.80 |
Under these assumptions, 372 whole billable hours are needed to cover the selected fixed spending and debt. This is a scenario threshold, not a safe utilization target or lender's coverage requirement. The comparison excludes taxes, owner distributions, unmodeled capital work and collection timing. It also does not establish that demand, crew availability or aircraft availability can support the assumed hours.
Avoid five financing and operating-budget mistakes
The first mistake is treating the down payment as the entire startup requirement. List deposits, training, acquisition work, regulatory preparation and cash needed before collections begin. Stress a later launch and slower receipts. The relevant reserve is the amount justified by those scenarios, rather than a universal number of months presented without a cash schedule.
The second is expanding the fleet before demand and working cash are supported. Examine customer concentration, cancellation terms and the resources required to operate another aircraft. The preceding example shows why a drop in billable hours can leave debt unchanged. Use the actual lender's definitions when testing covenants; do not substitute a generic coverage ratio for contractual compliance.
The third is smoothing maintenance into an unsupported hourly number. Map actual component status, calendar events, program coverage, exclusions and expected downtime. More flying can bring an event forward, while a calendar deadline may arrive even at low use. The engine-overhaul financing guide helps separate maintenance funding from technical authorization and a hypothetical future loan.
The fourth is choosing the aircraft before testing the customer mission and operating conditions. An attractive purchase price does not establish runway suitability, passenger-and-baggage capacity, dispatch availability or customer willingness to pay. Have qualified operational reviewers evaluate the actual candidate; use the supported operating model in the financial case.
The fifth is ignoring reporting and changes after closing. Calendar required reports, monitor actual results against assumptions and address proposed changes through the relevant agreements. New operators should explain management capability, realistic customer evidence, available equity and contingency decisions without promising that any single factor produces approval. Bring the aircraft, operating stage and unresolved financing questions to a Jaken Aviation discussion.