Questions Loan Underwriters Ask - Part 1

As part of securing an aircraft loan, an underwriter will need to review the following: 1.) Credit Application, 2.) Credit, 3.) Cash Flows, 4.) Net Worth, and 5.) the Aircraft information itself. As a part of an educational series, we will address each of these components separately and review some of the questions the lender tries to answer through analysis of a client's credit package. This should provide some insight into what a loan officer is trying to accomplish by requesting certain information.

Credit Application and the information contained therein:

1. Who is the client? The credit application starts with a brief overview to give a lender an idea of who the client is, where they live, how long they've lived there, and often times a snapshot of their aviation experience. This provides basic info on how to reach the client, and gives the lender a general sense of who they are considering lending to.

2. How is the aircraft being registered? The Application reflects the structure of the transaction requested. For example, if a husband and wife are co-borrowers for a loan, or if the aircraft is to be held in a single-purpose entity for tax or liability purposes, it will be outlined in the Application. The Application also identifies the owners of the company to give a lender a sense for who is authorized to sign on behalf of the company if a guarantee is involved.

3. How does the applicant make their money? The Application identifies the customer's occupation - their specific title along with the type of work they do. For example, an applicant may be the President of the company but a lender will want to know what type of work the company engages in. In addition, the lender is looking at how long the applicant has worked for this employer and/ or in this specific profession. This provides a sense of job and income stability. It's not uncommon for a lender to request more information on the company at this point, to get a better sense of the profession, industry and evolving picture of the applicant.

4. What type of financing is being requested? An overview of the financing request is included in the Application - what is the Applicant buying and how much are they looking to finance? This includes the specific figures (purchase price, down-payment, loan amount), as well as an overview of the type of aircraft (year, make, model), and the intended utilization of the airplane. In the case of a pre-approval, much of the aircraft-specific information is left empty, but a lender will often want a general sense of what the client's buying within the outline of a given purchase price and loan amount.

5. What is the client's personal financial situation? A short personal financial statement gives a general overview of the client's assets and liabilities. This is usually provided through a simple form with the application, or an applicant may attach their own personal financial statement. Finally, some basic questions that are often not answered elsewhere are included on a Credit Application. These questions may include citizenship, any significant derogatory credit issues (i.e. bankruptcy) that may not be included on a credit bureau report if too old, and any contingent liabilities, alimony or child support payments (often not included or accurately reflected on tax returns).