A type of aviation financing that doesn’t require you to put up everything you own — What a concept!

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A few years back, when Claude Franco, 44, a structured-debt aviation-financing veteran with Guggenheim Partners, was knocking on Wall Street doors trying to sell bankers on a “smart way” to value corporate jet loans, few would listen. His message was simple: Private jets are the most rock-solid business asset going. Bizjets hold their value far better than commercial craft, which endure hundreds of thousands of miles more wear and tear every year. Figure in the strong demand and the aftermarket halo effect of expensive custom electronics and interiors, and the average decked-out Gulfstream is often worth more in the fifth year of the loan than it was the day it rolled off the factory floor.

Still, at the time Franco was first making his rounds, top corporate-jet financing lenders mostly offered so-called “recourse loans,” which used the financial credit risk of the corporation or an individual’s cash flow as the primary determinants of loan terms. And pity the entrepreneur or poor overextended firm that went into default — the loans were usually structured so the banks could come after one’s business assets to collect. Little wonder so many well-heeled buyers in emerging markets, such as Indonesia and Eastern Europe, decided the hassle wasn’t worth it and simply paid cash. Americans not eager to hand over their balance sheets took a similar attitude. To the typical private-equity or hedge-fund titan, that someone would tie the value of his business or net worth to a nonperforming asset seemed the height of parsimony and arrogance.

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