Documentation to Support your Aircraft Financing Request
September 29, 2009 — AirFleet
Just like aircraft financing itself is unique, the documentation you submit in support of your credit application is unique as well. Understanding what documentation is needed speeds up the approval process by reducing redundancy and confusion. To start with, it is important to recognize that every Credit Application package has three components of financial information, each outlined below.
The application relays your vital financial information and provides some basics on the type of loan and aircraft you want. The guarantor’s signature on the application also allows AirFleet Capital to pull your credit. 99.9% of general aviation aircraft financing requires a personal guarantor, and the application serves to formally acknowledge this fact, allows us to pull your credit report, and gives us official authorization to conduct our credit diligence for your financing request. If your spouse is going to be the co-applicant, then they can simply fill out their personal information and sign the same application. If anyone else is going to be a co-applicant, then they will have to provide a separate personal financial statement (PFS) as there is only one imbedded in the application and their personal finances are held confidentially and separate from other guarantors. If you have already picked out a specific aircraft, we can take the aircraft’s specification sheet at this time as well. We eventually will need it and providing it now will shorten the turn-around time for approval. This eliminates any delays, speeds up the process, assists in any timeline you may be working with, shortens your wait, and helps with any schedule you or your dealer may have established.
This covers both personal and business returns. We require any guarantor to provide their most current 2 years of Federal personal returns (IRS Form 1040). Should the guarantor own a business, we will often ask for the 2 most recent business tax returns for the company as well (IRS Form 1120, 1120S or 1065). Often, clients will overlook submitting the accompanying statements and schedules for the tax returns – vital in underwriting the financing requests. In addition to the first 4 pages, many guarantors show income in schedules C, D, E, and/or F. In some cases, there is income, or non-cash adjustments we can account for in the schedules that is not reflected in the adjusted gross income on the 1040. These items may collectively change your cash-flow picture for a given year – which is the goal of the analysis. If we are missing any schedules, we will come back and ask for them – delaying the processing. Business-wise, when an individual submits business returns, we likewise need the schedules, statements, and often the K-1s; just like the need for schedules with personal tax returns. In addition to the business tax returns, we will often request year-to-date financials (Profit & Loss Statement and Balance Sheet) to reflect current financial performance.
Documentation is needed to support all credit applications. In the first section we outlined the Credit Application. In it, I stated that AirFleet Capital includes a PFS form for you to complete. If you have your own prepared PFS instead you may submit it as long as it’s current and executed within 60 days of the application date. We also ask for verification of your liquid assets – cash in your bank account and readily marketable stocks and bonds. You will claim them in the PFS as proof that you possess the cash for both the down-payment and operation of the aircraft (maintenance, insurance, etc), as well as adequate cash to support your other obligations. Typically, last month’s mailed bank statement, or a recently printed out on-line account summary from a bank and/or brokerage account will support this requirement as long it is identified with your name and date. The last bit of the verification documentation is a current payroll stub – proof that you are gainfully employed and the income claimed on the application is still present.
Those 3 portions – the verification documentation, the tax returns, and the application make up a complete application package. However, other documentation may also be needed depending upon your situation and the complexity of your financial picture.
Note that many times individuals, especially small-business owners have personal or business extensions filed on their tax returns (an extension allows for submission of your Federal Tax Returns beyond the April 15th deadline). This may set up a situation where we have no financial information on a person or an entity for up to 18 months. To fill this gap, we frequently ask for this extension paperwork, the client’s W2s and K-1s for the personal income information, and the prior year’s year-end financials and current year-to-date financials for the business. Just think – much may have changed for you financially in the past 18 months – especially in today’s changing economy.
Lastly, if you and a spouse file a joint tax return, but only you will guarantee the note, then we need copies of your spouse’s applicable W-2s. We must remove their income as part of the credit decision as they are not a guarantor.
This should be everything needed to submit a complete aircraft financing application. If you have any questions, please feel free to contact us or make a post. Until then, take care and fly safe.