Levels Of Liquidity

Adam Answers May edition.

Question: I recently had an aviation finance broker (not AOPA btw) review my financials, tell me I had plenty of financial capacity for the plane and amount I wanted to finance, but that I would be denied because the bank could not get at my cash.”  In effect there must have been some unwritten rule (?) about having “bank accessible” cash collateral that nobody talks about when trying to finance a plane.  Is this a “dirty little secret”(?)

Answer: Thanks for the question. Without knowing your exact situation it’s hard to know exactly what the broker was referencing. However, most likely what they mean is the amount of liquidity you have must meet a specific level. Lenders have varying amounts of minimum required liquidity. This can range from none (no minimum liquidity requirement) for some to enough for your down payment plus 18 months of payments thereafter for other lenders. Also, this minimum “liquidity” generally needs to be in the form of “marketable securities” meaning stocks, bonds, mutual funds or cash and it must be held in non-retirement accounts (unless you are of retirement age).

There are often good reasons to mitigate why someone might not need a minimum liquidity amount. This is why AOPA Finance has relationships with multiple lending partners. To ensure the most comprehensive options for our members, for situations just like this. 

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