How Loans Work:

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joefremont
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How Loans Work:

Post by joefremont » Sun Jan 06, 2019 11:44 pm

How Loans Work:

We have now introduced a system for asking for and giving loans between airlines. Here is how it works.

Now to be able to either request or issue loans the person doing this needs 'finance' permission. In addition to be able to issue loans the VA needs to have 'Advanced finance' active.

Apply For Loan.

First the borrowing airline has to ask for a loan. Go to your VA's finance page and if you have permission you will see 'Apply For Loan' under 'Management Options'.
- Select 'Apply For Loan'
- Select the fleet that will receive the loan
- Select the amount you would like to borrow, you can select amounts from 1 million to 1 billion V$.
- Enter a brief description as to why you want to borrow the V$, this is optional but the lenders may read this and it might influence there decisions.
- Push Submit.

You have now applied for a loan. Now be patient, the other VA's on the system will have to see your application and decide if they want to respond. These VA's are run by real people who have real lives outside of FSA and they live in many different time zones, so be patient, it may take a few days for them to respond. For now there is no automatic system that issues loans, we may add that for loans that have not been responded after a few days but we will wait and see if its needed.

In the Finance page, there is a new entry under 'Options' called 'Loans'. At the top of that page you will see a number of tables under 'Borrowing', this is for various loans based on there life cycle. The top table is for loan requests you have made. There is an 'X' next to each you can click to delete the request if you no longer want to borrow, when you do that all pending requests are automatically declined.

Below that are tables showing your pending offers, active loans and finished loans. More on that later.

If you have 'Advanced Finance' active you will see four more tables for loans where your VA is the lender.

The Lenders Makes an Offer.

As a lending airline, on the Loans page you can see all the loan requests that VA's have made, if you click on the 'Bank' icon you will go to the page where you can accept the request. Here you will see financial data for the VA and Fleet making the request, there is also a link to the VA so you can dig deeper before you make a decision. If you decide to make the loan you will fill in the following.

Fleet: The fleet in your VA that will issue the loan.
Amount: The amount you will lend, ten percent increments up to the amount they have requested. As long as the fleet has that much to lend.
Interest Rate: This is the calculated interest rate for the loan, on a monthly basis, and for the purposes of this system a month is 28 days (it divides evenly with weeks), up to 10%.
Loan Fees: This is a fee based on the amount lended that is added to the loan balance when the loan is issued up to 10%
Number of Payments: From 1 to 12, default 6.
Payment Interval: Week or Month. (Actually I am not sure if month is necessary).

Fill in the data and press 'Submit'. The offer is then sent back to the lender and they can either accept or decline it. Any time before the borrower accepts it, the lender can go to the loan information page and withdraw the offer.

Note, yes a VA can lend money to itself, this does make sense if its from one fleet to another, and may not make sense from a fleet to itself, but since no harm is done I did not stop it.

The Borrower accepts:

From the loan page the borrower will see all the offers that have been made to them, based on the terms they can accept or decline any of the offers but they may not accept more offers if the total lent is more than the amount requested. From the loan information page select 'accept' or 'decline' and press 'Submit'.

The loan has now been issued, the funds are transferred from the lender to the borrower and the borrower then goes and uses the money to build there empire. While the loan is active the system will automatically handle the payments at the end of each weekly/monthly interval but there are a few Actions that can be done:
Repay loan: If the borrowing fleet has enough cash they can just pay the loan back in full.
Make Additional Payment:
Make Half Payment:
Make Quarter Payment: All three of these options allow the borrowing airline to make additional payments to pay it off quicker. The amount is an increment of the original payment. Want to pay more? Just do it more than once.

There is one more action for the Lender:
Skip Payment: If the lender wants to give the borrower more time, they can select this and extend the time until the next payment. Not this does not reduce the amount the borrower has to pay back or effect the interest calculation, it just gives them more time.

At some point in the life of the loan, the borrowing airline or fleet may not have enough v$ to make the loan payment, at this point the loan will become 'default' status and will be paid when the VA/Fleet has enough to make the payment. At that point several things can happen:
After 24 hours the VA will go into 'Insolvent' status and certain financial restrictions will go into effect to prevent the abuse of the airlines assets.
After 48 hours if Finance by Fleet is active, that feature will be turned off to allow all the VA's assets to be used to pay the loan.
After 7 Days the VA will go into 'Bankrupt' status, the VA will essentially be locked and it will be up to an FSA Administrator to resolve the situation. The administrator can sell any asset, forgive loans and in the worst case can liquidate or dissolve theA.

Things to Note:

If for some reason an airline generates a transaction that will make there V$ balance go negative, say buy too much fuel, not have enough to pay for the repairs at the end of a lease, etc. The system will generate a 1 V$ loan to that VA that is already marked as default, payable now. This is to allow the system keep track of when the VA when negative and trigger the Bankruptcy system just described.

There is a new page at the bottom of the VA menu called 'Market'. Right now all it shows is a list of Loan requests by VA's. This page will be used as a central place where any asset that is not an aircraft to be bought or sold. Right now there are only loan requests but some day there will be more.

If you decide to start a new airline and you already have experience as an FSA pilot, the system will give you the option of a loan instead of the normal 25m grant. The loan will be from 40-100m at zero percent interest and you will have six weeks to pay it back.

Finally if you are the president of an airline and your airline has unpaid loans, the system will not allow you to quit. You will need to resolve the loans first. If you can't you can declare bankruptcy and then an FSA admin will resolve things so that you can move on.
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gcl
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Re: How Loans Work:

Post by gcl » Wed Jan 09, 2019 8:00 am

Sounds almost perfectly, great work!
One thing to the interval and duration. I Think, months are completely not necessary, and the duration is even in weeks with 12 very long. You know, when a new airline founder made his/her first flight, he/she thinks "Wow, cool, 100 mio win, I can request a loan and will be able to pay it back easy"... But whats after 6 weeks? The multiplier decreased dramatically, the same flight gives only 10 mio :( And our pilot is surprised. So, many new airlines will run into problems. In summary, I think, 6 weeks is enought.
And, one more question, just for interest: what, if the lender quit the system (deletes the acc or sth like this), before all money is paid back?

Anyway, good job, thank you.

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