Adam Answers in February's edition.
Question: I’m getting ready to buy a newer airplane. I had more income in 2017 than in 2016. Would it be better to wait for my taxes to be filed to apply for a loan?
Answer: Lenders review two years of tax returns for underwriting decisions. If there is a material difference in your 2017 income compared to 2016, then it may be beneficial to wait until your 2017 taxes are filed. Otherwise lenders can usually get comfortable with the 2015 and 2016 returns along with 2017 W2s and other year-end financial statements.
Question: I make a lot of W-2 income, why can’t you just go by that, why do I need to send all of my business documents?
Answer: This requirement will vary from lender to lender. If you have business interests all lenders will require at least your K-1s to verify percentage of ownership, cash distributions, and personally guaranteed business debts. Additionally lenders will need business tax returns and financial statements if you have a majority ownership. This is to verify global cash flow.
If your W-2 is coming from a business that you have controlling interest over, lenders will require all business financials. This is considered self-employed regardless of how the company is set up (C-Corp, S-Corp, etc.). Since you have a control over how much is paid in W-2, lenders need to verify that the company is profitable enough to support the wages. A corporate guarantee is also likely in this scenario.
Question: Do I have to include my wife on the application since we file taxes together?
Answer: Not necessarily. If ownership in the aircraft will not include your spouse and your income alone can support the loan request, a co-applicant is not required.
We realize that aircraft financing can seem complicated at first. Don’t let all of the lists and requirements overwhelm you. We work with hundreds of pilots every year to help them obtain financing. Give us a call today and let us help you navigate this process for you.
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