The Benefits of Pre-Approval

October 15, 2009 — AirFleet

Pre-approved for aircraft financing is an often misunderstood term. Most people think it’s like a pre-approval for a home mortgage. For a house, the bank has run some basic numbers, but not really started digging yet. At first blush, things look good so, barring negative discoveries in the future, you are approved before they have really taken a look at your financial information.

Pre-approvals for aircraft financing are actually the same process as the approval that every applicant goes through with their aircraft loan. The only difference is whether or not the customer has settled on a specific N# plane yet. With an approval, you are approaching the underwriting certain of an aircraft choice; specifically stating the flying machine you want to buy. With a pre-approval, you are getting approved for X number of dollars in a certain category of aircraft (single engine pistons, sport, commercial, helicopter, etc). You want to be able to buy an aircraft of that type that costs X dollars or less and take the pre-approval to potential sellers to show the seriousness of your intent. As well, you want to shop with confidence knowing that you have financing in-hand.

When a customer finds that special aircraft, its purchase price and valuation are submitted to the bank. As long as the aircraft books out, the underwriter simply fills in the holes in the various forms that pertain to specific aircraft.

There are a few advantages to pre-approvals. First, customers have greater bargaining power when they go to sellers. They can show them the approval, indicating their seriousness. This ups the buyer’s commitment to the deal and shows the seller that the buyer is a serious prospect. A sale in hand is worth two in the bush, after all. In addition, it simplifies the closing process. The biggest obstacle to a timely closing is the customer’s ability to get complete documentation for their approval. Since the pre-approval is the same thing, it is already taken care of and a non-issue.

Other than the specific aircraft selection, both processes are the same. If you have any questions about aircraft loan pre-approvals or anything else finance related, please feel free to give AirFleet Capital a call. Until next time, fly safe!