Mar 16, 2021
Business Takes Off from Private Jets to Banking & SBA Loans
- BRT S02 EP11 (58) 03-14-2021
Things We Learned This Week:
- Smaller Planes for Chartered Flights, Turbo Prop or King Air (holds 7 – 8people)
- TVM: Time Value of Money – Status Jets gives Time back to Clients
- Fractional Owner – 1/8 owner of a chartered plane, use it for 250 hrs / year
- SBA 7a Loans to for profit US business with 51% ownership by US Citizen
- Banks Get Loans From: The Fed, other Banks, or Depositors – Fed Funds Rate & Discount Rates are 2 types of Interest rates
Guests: David Henry, Founder / CEO of Status Jets
https://www.linkedin.com/in/peruna
David breaks down the charter airline industry (private jets), and the aviation industry at smaller airports. The types of planes (sizes), the clients he works with, and how chartered flight industry helps their business. Status Jets deals in all areas of the industry from being an airline broker, to also servicing chartered flights.
Private Jets provide convenience and save time for high end clients with multiple sites. There are 10K airports in the U.S., but only 535 serve by the airlines, so private airlines fulfill a need to for access to smaller markets. We also review the regulations, landing fees, the security setup with private airports, and the impact of Covid19 on the industry.
Notes:
David Henry had a background in radio, worked as a GM, & in Sales at stations like CBS Radio KRLD plus 5 stations.
Status Jets located in Dallas TX, works with clients Coast to coast.
airline industry, investors, charter flights, regulations, & the impact of Covid19
How chartered flight industry helps the business industry with multiple locations
Security setup with private airports - Pre-provide passenger list & cross reference
Types of planes - Turbo Prop or King Air – holds 7 – 8 people
Light Jet – Hawkers hold 7
Business owner, not AT&T, have their own mid-size plane for 10-12 trips a year.
Covid- pro/con – not much affect, increased business
Comp. – private side, cost 10X to fly private vs. first class – carries 6 - 8 people.
TVM – Time Value of Money Status Jet sells back time to clients
Time component – convenience with big clients and celebrities.
Status Jets is a time machine, gives control of your business schedule
Aircraft Broker –
Charter flights – whole plane, agency with contacts across U.S., & the world.
Options - 1.Own it. 250 hrs./year, 100-200 Nets Jets - fractional owner of 1/8
2.On demand charter – 3-10 trips
Landing fees – better at small airport.
10K airports in USA, only 535 served by airlines.
Good use of private aviation is necessity and access.
Tim Romano w/ Velocity SBA
https://www.velocitysba.com/about-us
https://www.linkedin.com/in/tim-romano-a37b233a
From banking to loans, what’s involved and the process to secure a loan. Tim breaks down different loans like: SBA 7a loans to for profit US business (with 51% ownership by a US Citizen), small business loans, and commercial real estate.
SBA loans have many qualifiers and rules: Size of loan varies on income, employees, etc.; 80% gov’t guaranteed backed – like an insurance agency, 75 cents on the $ dollar; Borrower must pass SBA requirements with APP, and put down 10 – 25%.
The bank is still lender in SBA, so the usual lender preferences apply: credit profile, established business and operating history, activity in P&L, cash flow, personal guaranty, and collateral (and they will avoid startups and new business, or unique setups).
Notes:
SBA 7a loans to for profit US business with 51% ownership by US Citizen
Small bus loans or commercial real estate w/ Size of loan varies on income, employees, etc. & 80% gov’t guaranteed backed – like an insurance agency, 75 cents on the $ dollar, Borrower must pass SBA requirements with APP, and put down 10 – 25%
Bank is still lender in SBA, interest rate wall st prime rate of 3.25% + 2.75%
Originate loan - SBA charges estimate guarantee fee of 2.75% of total loan
Lender preferences – credit profile, established business and operating history, activity in P&L, cash flow – avoid startups and new business, or unique
Collateral – preferred, but will own without – require life insurance
ie: real estate, $ cash on hand, equipment, A/R, inventory
Loan Collateral requirements, not all assets work: hard to perfect a lien on equities, or cash value life insurance or Goodwill, or IP – does not assign a value to it
Personal guaranty required from all owners with 20% + ownership stake
Lender wants 1.5: debt service coverage ratio = EBIDTA / Annual debt service
Determine if borrower has cash flow to service debt
Borrower base – A borrowing base is a central part of asset-based lending, the amount of money a lender will loan your company based on the value of your business assets. The amount of collateral you offer in order to secure the loan influences just how much a lender is willing to give you.
Banks are competitors and referrers of Velocity SBA
Banks lend on deposits (10-20% reserves, cost of funds is less than 1%, 25 basis points) vs Velocity SBA has capital to lend (also has minimum threshold of reserves) and also gets bank loan and makes $ on the loan spread
Fed Funds rate (interest rate set by Fed for banks to lend to each other)
Discount Rate (interest rate charged by Fed for banks to borrow $ from Fed) on 2 lender rates for banks to borrow $
Banks Get Loans From: The Fed, other Banks, or Depositors
Banks can borrow from other banks or from the Fed and the interest rate is 25 basis points, .25 % - Banks then loan at 5%, and the spread is 4.75%
Business of Banking –Bank have depositors, they pay interest on deposits also at .25 %, and then again make loans at 5% = 4.75% profit spread or higher (Arbitrage)
https://www.investopedia.com/terms/d/discountrate.asp
https://www.investopedia.com/terms/f/federalfundsrate.asp
Business Topic: https://brt-show.libsyn.com/category/Business-Consulting-Bus+Lessons-Management-General
‘Best Of’ Topic: https://brt-show.libsyn.com/category/Best+of+BRT
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