NAFA member, Adam Meredith, President of AOPA Aviation Finance Company, discusses profit and loss statements and balance sheets as part of the aircraft loan package.
The profit and loss statement (P&L) and balance sheets are a requisite part of the aircraft loan package, but only when a business entity is part of the transaction. And by “part of the transaction,” we mean anytime any percentage of equity in a business contributes to the loan applicant’s income.
Some people might say, “That’s not fair. The business isn’t buying the airplane. I am.” And that’s the point. The lender must feel comfortable knowing that your income stream will not be choked off should a business you have a stake in suddenly lose its revenue stream and/or have ballooning expenses.
Quick primer: A P&L is a document that provides a snapshot of revenue vs. expenses over a specific time frame—either a calendar year (January-December) or a fiscal year (e.g. August-July). A P&L answers the questions, “What's the top line you're making? What's it costing you to make that? What are all the different pieces in between that you're having to pay for?” And finally, “What do you get at the end?”
This article was originally published by AOPA Aviation Finance Company on October 4, 2021.
