Don’t lose your SHIRT: five borrower attitudes that stall aircraft loans

I obtained my private pilot certificate in 2005. During my training, ground school, and study for the exams I remember learning about the five hazardous attitudes. These attitudes are “attitudes that can interfere with the ability to make sound decisions and exercise authority properly” per the FAA Pilot’s Handbook of Aeronautical Knowledge. The FAA also provides five antidotes to counteract these attitudes. Over my 15 years of working in aircraft lending, I’ve participated in many aircraft transactions. Just like in flying, a loan applicant and borrower can impact the loan process through his or her attitude during the process. In reflecting on what I’ve observed, there were five attitudes that stuck out, which I’d consider the five hazardous attitudes of a borrower during the underwriting process. And just like with the FAA hazardous attitudes, there are five clear antidotes to consider to counteract these attitudes. And just like any good aviation definition, the five hazardous attitudes of a borrower can be defined as an acronym… “SHIRT”: Silence, Hide, Incomplete Information, Rush, Temper.To break these attitudes down further, and including antidotes, a borrower needs to remember to avoid:SilenceThe underwriting process for an aircraft loan is a team effort, and collaboration requires good communication from both applicant and underwriter. When a party goes silent, it becomes difficult to meet expectations and achieve desired results. The antidote to silence is to communicate often. It’s important to keep a regular cadence of communication with the bank during the underwriting process to ensure all parties are on the same page, and the lender is meeting your expectations. HideThe purpose of underwriting is to ensure the applicant demonstrates repayment ability, and that the loan is a good risk for the bank. There are several areas under consideration to make this credit decision, from financial analysis to pulling credit reports and background checks. I’ve seen instances over the years where an applicant may have filed bankruptcy years ago and didn’t disclose it in the initial application process. It’s always better to know these sorts of things going into the analysis as opposed to us learning it ourselves along the way. So, a good antidote to this hazardous attitude is to disclose any issues up front. Incomplete informationThis one goes along well with “hide,” because oftentimes an applicant will provide high-level financial information, or what they think we’ll need to complete underwriting. We always make sure to send out a list of financials we usually need as a starter package and providing those details will help limit the number of follow-up requests for information we have. The obvious antidote here is to share your picture, including financials and an overview of what we’re seeing when you submit your initial financial package during the application process. RushBuying an aircraft is an exciting opportunity, and sometimes the pacing of the deal is such that an up-tempo underwriting process and loan closing is warranted. However, we often see borrowers worried that we will slow down the closing due to our underwriting and closing timelines, and they may lose the aircraft they have a deposit on. This continued pressure to rush approval and closing creates the opportunity for us to potentially make mistakes, and, in certain instances, can make us concerned we’re being pushed so we overlook some issue in underwriting that may or may not be at the forefront of our analysis. The antidote for rushing is to slow down and learn together. As mentioned earlier, aircraft lending is a collaborative process, and taking the time to learn is an important step along the way. Your lender is going to be working with you through the term of the loan, you might as well use the underwriting process as a time to get to know your lender and confirm they’re the right fit for your plans as well. TemperThe last hazardous attitude is temper. Sometimes, the questions the lender may ask during underwriting seem invasive for your expectations. Sometimes, the answer you receive may not be what you anticipated. It’s important to remember that a lender is assessing overall risk and ensuring that the loan makes sense for both the bank and borrower through their own proprietary analysis. It’s not an effort to avoid doing the loan, it’s an effort to ensure the loan is done right, the first time, for everyone. The antidote here is to have patience with questions and remember that you and your lender are both working toward the same goal of getting you into your aircraft as smoothly and efficiently as possible.An aircraft purchase should be an enjoyable experience, and including a loan as part of the purchase process should not create cause for concern. By considering these five hazardous attitudes of a borrower you can make best efforts to create a collaborative environment with your lender and make sure you don’t lose your SHIRT along the way. About the authorMike Smith is President of Scope Aircraft Finance and is based in Columbus, Ohio. Scope is a wholly-owned subsidiary of Park National Bank and an industry leader in providing finance solutions in the jet, turboprop and high-performance piston markets throughout the lower 48 States. Mike currently serves on the NBAA Business Aviation Management Committee, the board of the National Aircraft Finance Association, the board of the Ohio Regional Business Aviation Association as Immediate Past President, and the Advisory Board to the Ohio University Department of Aviation.