Airport concession lending is a unique form of lending for an industry with complex business models and financing structures. There is no other industry or financing solution quite like it.
Understanding the Airport Concessionaire Model
Airport concession lending is difficult to understand because of the layers of parties involved and the large investment needed to participate.
The airport concessions model begins with:
Project Owner/ Agency
The airport authority and the Federal Aviation Administration (FAA) agree to open a new terminal and set out to find a sponsor to invest in it. A request for proposal (RFP) is submitted to potential sponsors.
Prime Concessions Operator
These sponsors are called prime concessions operators—highly capitalized businesses who have deep expertise in operating businesses inside airports.
Joint Venture with Small Business Concessionaire
The prime concessions operator enters into a joint venture with a small business with an Airport Concession Disadvantaged Business Enterprise (ACDBE)-certification that wants to expand or open a business in an airport.
And it gets more complicated:
Airports receiving federal financial assistance must allow for ACBDE-certified businesses the opportunity to bid and invest in the development of the terminal to level the playing field between large businesses and hyper local small businesses. Through this joint venture, the ACDBE becomes a minority partner.
To buy into the joint venture, those ACDBEs need access to capital.
Lender
Airport concession deals can easily reach millions and can be a heavy financial burden on the ACDBE. Finding sustainable financing solutions for deals like this gives local small businesses the opportunity to invest in deals otherwise unattainable.
Why Do ACDBEs Need to Invest
The FAA holds a national benchmark of at least 10% of each terminal to be operated by an ACDBE. This allows ACDBE-certified small businesses the chance to participate in deals inside the airport. For an ACDBE, finding financing solutions to fund the joint venture could be the deciding factor on whether they can propel their business exponentially in an airport.
Frequently Asked Questions
Why is airport concession lending so different?
Airport concessions lending is different because of the complex business model and financing structure that goes into the development of a business in an airport.
What is the airport concessionaire model?
A project owner sets out to find a prime concessionaire to serve as majority partner in the project. The prime concessionaire enters a joint venture with an ACDBE small business as a minority partner. The ACDBE must buy into the partnership. A lender can offer financing solutions to the ACDBE to participate in the joint venture.