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How do you assess your borrowers?

How do you assess your borrowers?

When assessing a Borrowers application we take into account a number of factors. These can be from the information we have learned from credit reference agencies with relation to directors, shareholders and other members of the company. We also look at the financial standing of the business, including financial trends of performance. We assess the underlying lessees in lease transactions and their track record. We perform research available on the asset to be leased, especially when it comes to aircraft which are highly regulated and, as such, information is plentiful on the asset, its current and potential future value etc.

Regardless of the types of leases offered to lessees, standardised processes, credit investigation and analysis is conducted. Credit analysis examines three basic types of information:

  • Lessee management identity;
  • business operations and income information;
  • financial details of the lessee (e.g. earnings, assets, liabilities, net worth).

The above information comprises what is often called the “3 C’s” of analysis: Character, Cash flow and Capital. Often called the fourth C, “Collateral” is considered subsequently by Ablrate when structuring the terms of a loan.

The major objective of obtaining information on a lessee is to ascertain whether the business and its management may be considered responsible and reliable. Financial information is required to give Ablrate needed data on the cash flow capacity of the lessee. A lessee’s ability to repay can usually be determined through an analysis of annual earnings against fixed expenditures and proposed new debt servicing commitments.

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