Are you looking to borrow or lend for an aircraft transaction? Paul Sykes, Founder, FlyFunder highlights some joined-up thinking in a fragmented global lending community designed to make aircraft finance easier…
Having worked as an aircraft financier for several years with AirFinance, GE Capital and RBS Aviation Capital (among others), Paul Sykes was well-placed to spot the gaps in the market that led him and a team of experienced financiers to launch FlyFunder.
Designed to facilitate, expand and revolutionize the interaction between General Aviation buyers and financiers, FlyFunder fills a perceived communication and connection void between specialist aviation financiers, the buyers of aircraft, the Original Equipment Manufacturers (OEMs) who are often reliant on financing to make their sale, and the sales agents who want to sell their aircraft.
“There is a very simple sign-up process,” Sykes reveals. “After verifying their email address borrowers are able to immediately announce a deal to our financiers.
“Those interested in a borrower’s financing requirements (usually by country, aircraft type, deal size, etc.) are automatically notified, and will connect with the prospective borrower on the site using our simple messaging system. The two parties can then engage in discussions. It’s a facility that is totally free to use.”
Filling a Void in Aircraft Finance
So what were the perceived problems and foibles in the aircraft financing market that led Sykes and his team to found FlyFunder in the first place?
“Over the years I have seen exactly how inefficient the process was for all parties looking to find new deals,” Sykes explains. “Buyers find it impossible to know all of their financing options that are available to them and have no way to be sure they are getting the best (or even the most appropriate) deal.”
Indeed, with the traditional system aircraft buyers often consult the OEM or their used aircraft broker to seek advice on funding, or will speak to a limited pool of financiers they already know through existing relationships, notes Sykes.
Naturally, borrowers and lenders are confined to a relatively shallow pool of options.
“Moreover, financiers often have an appetite for funding outside of their domestic markets, but without having personnel in the necessary locations or time zones it can be hard for them to reach out to all potential clients. Business Aviation is an increasingly global marketplace, and it can feel impossible to be everywhere.
“FlyFunder was created to enable the lenders to see deals from all over the world at no cost until a transaction actually closes via the platform (At that point a small 0.2% commission is paid, which is a small price for success).”
Ultimately Sykes believes his team has created a product benefitting all stakeholders in the industry.
“Buyers see more financing options, giving them a better chance of getting the best deal. Financiers get more leads specific to their requirements. And brokers or OEMs can offer added value to their buyers by providing a competitive funding solution, helping them sell the aircraft.”
Overcoming Challenges in Aircraft Finance
FlyFunder has seen an impressive variety of deals announced since its launch, from very small and older aircraft, to brand new Ultra-Long-Range jets. At the time of writing, there were 58 live opportunities for financiers, and over 60 financiers have signed-up to date (each with their own unique appetite for deals).
Even so, Sykes notes there have been challenges along the way. “One of the biggest challenges has been where a deal is announced but delivery is a year or more into the future. Another challenge is that some opportunities are just not with a creditworthy borrower.
“We also noted that some borrowers prefer a more personalized service, and for this reason we’re launching a ‘FlyFunder Premium’ service, allowing users to tap our expertise from a credit and structuring perspective to help pull together a deal, based on their requirements and our knowledge of a broad range of lenders.”
An additional challenge lies in the fact the aircraft financing sector has traditionally seen borrowers return to the banks they have pre-existing, trust-based relationships with to provide solutions for their financing needs. Sykes is clear that the establishment of FlyFunder doesn’t undermine the importance of those long-standing business relationships.
“I would never underestimate existing relationships, and would encourage prospective buyers to have those discussions.
"I would simply suggest that even if, as a borrower, you get what you believe to be a great offer from a bank you have a relationship with it would be wise to verify this by reaching out to the FlyFunder community and receiving other offers before settling on where your financing will come from.
“We actually ask whether borrowers have spoken to any other banks about the deal so we will not seek any commission from them if the borrower ultimately closes the deal with their ‘relationship’ bank.”
Improving the Chances of Aircraft Financing
Clearly FlyFunder is designed to broaden scope and maximize aircraft financing opportunities, but are there areas or borrower types who the tool is not suited to? “It is absolutely for a global audience,” Sykes refutes.
“It’s fair to say that there are some geographies better served for financiers (such as the US and UK), and it is inevitably harder getting interest in a smaller deal, but ultimately once a deal goes live, all financiers, new and old, can connect with the prospect.”
So how can a buyer, regardless of deal type or location maximize their chances of getting funding? “Typically buyers are seeking a debt or operating aircraft lease solution, and we give buyers the option of being specific on their requirements, or declaring that they have no preference on funding solution,” Sykes offers.
“I would recommend this in most cases as it gives the buyer their full range of options.”
Disruptive Technology in Aircraft Financing
Since its official launch at NBAA-BACE2017 in Las Vegas last October, ‘Disruptive Technology’ has been used to describe the market impact of FlyFunder on more than one occasion. “The whole concept of disruptive technology is based around innovative technological developments that improve and rationalize industries to the benefit of the consumer,” Sykes elaborates.
Examples of disruptive technology might include Expedia and Travelocity (for booking flights); Uber in the taxi market; and Airbnb for travel accommodation. “Expedia and its ‘comparison’ peers didn’t just make the process better for consumers who find the best deals across a wider range of airlines, but they also increased the amount of flights booked,” Sykes continues.
“Consumers were happy to book more, knowing they were getting good deals. Global flight hours trebled within five years.” Uber and Airbnb revolutionized their respective markets for a younger, more technologically-savvy (and arguably value-conscious) generation of consumers, too, though not without ruffling a few feathers along the way.
“With FlyFunder, we identified that we have a totally global, but highly-fragmented market in aviation finance. Borrowers and financiers of aircraft are all over the world with differing funding requirements and appetites for lending, with no simple means of connecting the two together.
“Logically, our plan was to match and connect the ‘borrow’ and ‘lend’ sides of the market, and to use our unique knowledge of the market and aviation transactions to help do this in the most beneficial way for market participants.”
Through FlyFunder, when an aircraft buyer seeks finance they can be connected directly to the financiers who are interested in their funding requirements based on high-level, non-sensitive criteria. Gone is the need to make 20 phone calls because you have no idea what each aircraft finance provider is looking for. Ultimately, that sounds like disruptive technology at its very best…
More information from www.flyfunder.com
Calling all Financiers
FlyFunder is open to all financiers who are active in the General Aviation financing market, and interested in financing jets, helicopters or turboprops. The sign-up process is simple, and after filling in some basic details, financiers verify their email address and can begin browsing for deals immediately.
Financiers agree to certain conditions by signing-up, with the key item being the payment of a small commission of 0.2% (20bps) if a deal found on FlyFunder is successfully closed. Those interested in a demonstration should contact Paul Sykes via FlyFunder.
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