BY VICTORIA BRYAN, CROWDFUNDING has been used to finance everything from bands to business start-ups, social causes and even plastic surgery. Now it is being used to buy planes.
A new online platform is attempting to attract investors to finance the purchase of small passenger jets — deals that have often struggled to find backing from traditional lenders.
Major airlines such as Emirates and Lufthansa and big leasing companies, which place large orders for dozens of huge aircraft, find it relatively easy to get funding from banks and investment firms.
But regional operators tend to buy just a couple of planes seating under 100 passengers at a time, making funding such deals less attractive as an investment proposition, with lenders demanding more collateral than before the financial crisis.
David Bradley-Ward, a director at regional plane lessor Phoenix Aircraft Capital and a corporate financier, co-founded Ablrate.com after Phoenix struggled to find funding for a deal last year to buy a jet from one airline and lease it to another.
The web platform aims to raise money for both leasing companies and airlines via peer-lending to meet the funding gaps in purchasing small aircraft. The difficulty in finding financing means many regional carriers are not able to renew their fleet as quickly as they would like and the process can be costly.
“There’s plenty of financing going on but it’s financing at a different level. There’s no trickle-down effect, which is why we’re seeing the growth of the peer-lending industry,” former RAF engineer Bradley-Ward says.
Crowdfunding allows individuals and small businesses to raise money from pools of investors who can put money into peer-to-peer lending schemes. Investors can lend as little as £10, often without the fees accompanying equity funds.
Pioneering platform Kickstarter, which has been running for five years, says it has received $1.28bn to date from 6.9-million backers to fund 68,181 completed financing projects.
However, given the uncertainties of crowdfunding, which has attracted criticism for lack of investor protection, Ablrate.com, a lending platform for aircraft leasing transactions, is starting small.
Its first deal on the site, launched last month, aims to raise £100,000 to help fund Phoenix’s purchase of an ATR 42-500 turboprop jet to be leased to state-owned Colombian airline. Similar aircraft can cost up to $20m when bought new.