NAFA member, Adam Meredith, President of AOPA Aviation Finance Company, walks you through the aircraft purchase process.
Potential first-time aircraft buyers will occasionally ask us what is involved in the process of working with AOPA Aviation Finance when making an aircraft purchase. Because we are a broker, rather than a direct funding source, we have multiple options. Before we consider the best one for an individual’s situation, we do a few things.
The first is to sit down and listen to the member, or their advocate. We want to find out what they’re looking to do with the airplane. Once we understand that, we’ll discuss things like down payment, different potential amortization schedules, length of term and the expected interest rate range.
Next, we assist in compiling a complete package of financial data. The initial conversation usually provides us with a good sense of the member’s financial picture, but things do change. Our general underwriting team will then assess and map out what is submitted to the analyst determining which lender would be the best candidate.
Occasionally the situation changes after we get a credit package put together. The borrower may not feel as confident about the size of the loan and being able to make the monthly payments. Or, the person has spoken to a tax attorney or tax accountant and wants the aircraft owned by a business rather than personally.
If that occurs, we’ll have a follow-up discussion with the borrower. The lender we initially discussed might not be the best suited. We then work to reset expectations, given the updated information.
As a minimum, we try to work only with lenders that are going to provide good customer service. The key question we ask is: “Does the loan package still fit the borrower? We re-adjust along the way until we decide what the best option is. We then submit to the lending institution.
Not every person’s situation is an easy fit for the lender. Two examples spring to mind. In the first, a person may own a business or have multiple entities that are flowing through to the Schedule E on a federal tax return. That may create a complicated financial picture. It’s not uncommon that those are the kinds of transactions that can sometimes take longer to get done because there’s more analysis that must occur on all of the various entities.
In the second, let’s say the age of the collateral is a little bit over; or let’s say instead of 20% down, the borrower only wanted to put down 15%. Sometimes we can convince a lender to make exceptions to their established policies based on other attributes.
That said, it’s important to remember we don’t make the lending decision. While we generally have a good idea of what will or won’t work, ultimately, lenders are regulated by legal requirements they must adhere to. The beauty is that because we’re in frequent discussions with these lenders, we generally have a good idea of any imminent changes and you DON’T get a “one-size fits all” approach.
This article was originally published by AOPA Aviation Finance Company on November 23, 2020.
