The income statement (P&L) and balance sheets are a mandatory part of the aircraft lending program, but only when a business entity is part of the transaction. And by “part of the transaction” we mean any time a percentage of a company’s equity contributes to the income of the loan seeker.
Some people might say, “This is not fair. The company does not buy the plane. I am. ”And that’s the point. The lender should feel comfortable knowing that your source of income will not be stifled if a business in which you have an interest is suddenly lose your source of income and / or have skyrocketing expenses.
Quick introduction: An income statement is a document that provides an overview of income versus expenditure over a specific period, either a calendar year (January-December) or a fiscal year (eg August-July). An income statement answers the questions: “What is the top line that you do?” What does it cost you to do this? What are all the coins in between that you have to pay for? And finally, “What do you get in the end?
A review is a summary of the financial balances of an individual or organization. When you take a P&L and a balance sheet together, they collectively create a cash flow statement. While you can submit a cash flow statement as part of your package, lenders, like investigating detectives, will want to make up their own minds independently.
What they are looking at are the assets of the entity. In particular, what are its current and non-current assets? Non-current assets are almost always illiquid assets, such as property, plant and equipment. Current assets are cash and receivables, which can be quickly converted into cash.
A lender also analyzes the leverage of the business, that is, the liabilities on the balance sheet. Lenders will look at current liabilities and non-current liabilities. Current liabilities are debts and other bills due within the next 12 months. Non-current is generally defined as anything that is owed over 12 months. When you subtract the liabilities from the assets, you are left with the equity of the business.
Finally, lenders will consider the company’s leverage (liability versus equity) relative to similar businesses in this industry. A company where there are more liabilities than assets (negative equity) is effectively insolvent. Lenders are reluctant to lend to anyone associated with an insolvent business.
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