By Rich Loyd, Orange Count Business Journal

Flight School Financing takes off with Stratus Financial LLC. Dedicated to meeting the current industry demand for pilots, Brandon Martini and Anthony Geraci partnered in 2020 to establish a lending firm specializing in flight school financing. Martini, who has been a pilot for the past decade, initially had trouble getting funding for the flight school he founded in 2016, NextGen Flight Academy. He decided to start offering loans to his own students.

Geraci, chief executive of Irvine-brd law firm Geraci LLP, encouraged Martini to expand the financing program to other schools in need of funding. The pair started Stratus with their own capital and eventually added three more schools in the first five months. Three years later, the Newport Beach-brd company has partnered with almost 150 flight schools in the U.S. either exempt from licensing or with licenses to lend in 36 states. “As we got more funding sources and more people into our investment fund, we expanded,” Martini told the Business Journal.

All borrowers are referred directly from the firm’s flight school partners, he added. The company’s interest rates range from 8% to 23%. Stratus ranked No. 1 on the Business Journal’s list of fastest-growing private companies in the small category, with 12-month revenue of $2.3 million ended June 2023, up a whopping 4,209% from two years ago. Martini recently exited from his role at NextGen in order to direct all his attention to Stratus, which has a goal of getting licensed in all 50 states. “We want to help as many people as we can become pilots,” he said.

Flying Colors

Loans range from $80,000 to $100,000 on average. Flying programs can last anywhere between an accelerated five months to about two years. The loan program requires the academies Stratus partners to have the proper aircraft for training and an official curriculum for its students. Stratus is the only company that works with both Part 61 and 141 schools, according to Martini.

Part 141 schools are already verified by the Federal Aviation Administration while Part 61s are less regulated. Martini said the firm is brd on a no shared risk model, meaning Stratus doesn’t require the schools to underwrite the risk of funding while other loan programs may require the educator to pay all or part of the loan if the student defaults. “They’re in the business to teach people how to fly. We’re in the business to lend money,” Martini said.

In the beginning, Martini would call up multiple flight schools daily to pitch them the loan program which eventually helped the company expand from state to state. Stratus moved its headquarters from Irvine with 10 employees, to Newport Beach this year and has established a second office in Austin, Texas due to its expanding network of partners. The company now employs almost 60 people and Geraci expects to surpass 100 by next year. Most work remotely and are brd all over the world. About 15% of Stratus employees are pilots—Martini even taught Geraci how to fly. “We are for pilots, by pilots,” Martini said.

Pilot Potential

According to Boeing’s technical outlook, 649,000 pilots will be needed to join the commercial segment over the next 20 years. Stratus aims to help flight schools around the country develop these future pilots through funding their education. Martini noted that the pilot shortage began around 2019 with many people aging out. COVID-19 exacerbated the problem when the pandemic halted travel and airlines let go of recent hires and those still in training.

Now with flight training becoming more expensive, Martini and Geraci believe they have found an untapped market. Most of their consumers are looking to become commercial pilots, Martini said. “We want to set them up for success,” he added. On the investor side, Stratus pays a flat rate of 13% annualized to all the investors who contribute to the company’s equity fund.

“We’ve been doing that for over 30 months in a row,” Martini said. Stratus is still accepting accredited investors with a minimum of $250,000. Martini pointed out that the income potential of Stratus borrowers is “insane” with pay for new pilots starting around $100,000. He also noted that flight training could be an industry worth $2.5 billion per year, not counting consumers who choose to fly private or as a hobby. “With automation taking over, we’re in a special time right now with humans flying and I want to help as many people experience that as I can in my lifetime,” Martini said.