If you’re a small business owner looking to purchase a drone — especially a high-end model that costs many thousands of dollars — it might make sense to pay for it in small increments over time. After all, you might not be able to pay for a $13,200 Matrice 300 RTK upfront. But if you’ve got a solid business plan, and that Matrice’s value will far exceed the initial cost, then taking an informed risk and buying it without having the cash on hand might be a smart business decision. If that’s you, here’s what you need to know about financing a drone business:
Decide what type of funding you need, and for what
Financing a small business can mean a few different things. You might need money for various startup costs, ranging from marketing spending, the printer and the drone itself. You might have pretty much everything you need except the drone (after all, that’s a significant cost).
If you need general cash: business lines of credit
A bank can provide you with a small business loan or a business line of credit. Think of it kind of like a credit card; the bank give you access to a specific amount of credit, and then you make payment (and likely owe interest) on the funds you actually use.
If you’re already a loyal customer with a strong banking history at a major bank, you may more easily qualify for a loan from a bank, and likely at a lower-interest rate.
If you have less of a banking history, big banks might be less inclined to front you with thousands of dollars. An alternative? Look to locally-owned banks and credit unions.
If you don’t meet traditional banks’ strict lending criteria: SBA loans
Because the U.S. Small Business Administration promises lenders a federal guarantee on your loan, it’s less-risky for banks to lend you the money you need, making them more inclined to offer you the full amount of money you want at a favorable interest rate.
The catch, of sorts? Since the loan is issued in part through the government, the application process is also lengthy and complicated.
If you only need to purchase the drone: look to point-of-sale loans or credit cards
If you’re looking to buy the drone only, then you can typically avoid a lot of paperwork and headache simply by taking advantage of a point-of-sale loan, where the seller allows you to pay back the drone in smaller monthly increments, or to charge it to a credit card.
If you’re buying directly through the DJI site, here’s an option that’s relatively easy: Affirm Financing. Affirm is a program that offers point-of-sale loans for online and in-store purchases for a number of online retailers including Walmart, Nordstrom and, yes, DJI.
When paying for your DJI drone through Affirm, you’ll owe monthly payments plus interest (that’s payment to Affirm in exchange for fronting you money). Thus, your drone will end up costing more overall than had you paid for your drone in full, up front — so we don’t necessarily recommend this option for everyone. Interest rates on Affirm loans range from 0% to 30%.
If you go the credit card route, you can avoid interest payments if you charge it to a 0% APR credit card and pay the balance in full before the promotional 0% APR period is up.
If you’re a high-growth company: seek venture capital funding
The drone industry saw tons of hype in the early 2010s — particularly after Amazon CEO Jeff Bezos announced during the 2013 holiday season that his company was getting into drone delivery. From there, everyone wanted a drone, it seemed.
But even though much of that hype has died down among the general public, venture capitalists are more interested than ever in drones. 2020 was certainly a weird year for all industries, but even coronavirus signaled high interest in drones given that people saw them as useful rather than just a gimmick. For example, drones are inherently socially-distant, and drone delivery proved a contactless way to get everything from PPE to hospitals, and medications to seniors at home. And still, other drone companies saw major funding in 2020, including indoor inspection drone company Flyability and computer vision technology company Iris Automation.
But look back just one year beyond that. 2019 was a record year for drone investment worldwide, as more than $1.2 billion was invested in the drone industry across 157 investment deals in 2019. Between 2008 and 2019, more than $4.4 billion had been invested into drone companies.
Typical requirements for financing a drone business
BNC Finance, a company that provides financing to small, medium and large businesses via a broad range of financial products, told The Drone Girl about its explicit plans to seek out drone business owners needing financing as clients.
BNC has a specific UAV financing process — not necessarily any different than financing any other equipment. But it’s interesting, and in a way comforting, to see that BNC is interested specifically in financing drone companies.
If you’re a startup
Startups typically need to have a stronger application than more established companies, yet could be entitled to a smaller loan or less favorable interest rate.
Typically, small business owners applying or financing must have credit scores of 700 or above, and they can expect to receive $3,000 to $20,000 with loan terms between 24 to 60 months.
If you’re an established business (more than two years of business history)
If you’re more established — you’ve been around at least two years as a drone business — expect to have credit scores of at least 600 to get approved. From there, expect to receive $3,000 to $250,000 (though you’ll need comparable credit debt for larger amounts), again with loan terms between 24 and 60 months.
Not all lenders will mirror BNC exactly, but this fairly typical of what you can expect to receive when applying for financing for your drone business.
Other ways to get funding for your drone business
Seek drone grants
Since drones are such a new and promising field, there are tons of grant opportunities. Most grants are in the way of drone research, which can be a useful way for you to test technology that you can use to make a unique, new product.
Many grant opportunities come from the Federal Aviation Administration itself. Earlier this year, the FAA gave out $5.8 million to academic researchers in eight different drone-related areas in its latest round of ASSURE grants.
The FAA also maintains a page for aviation-related grants and scholarships. See the FAA’s grants and scholarships specific to:
Perhaps more useful for small businesses are the FAA’s funding opportunities. Those include:
- Aviation Workforce Development Grants: grants to academic institutions and the aviation community to help prepare a more inclusive talent pool of pilots and aviation maintenance technicians
- Aviation Research Grants: grants and cooperative agreements ranging from several thousand to several million dollars to support aviation-related research in emerging aviation technologies.
- FAA Centers of Excellence: funding to six, competitively-selected ‘Centers of Excellence’ which are academic institutions and their industry affiliates
- SE2020/2025: an IDIQ-based contract centered around research, analysis, systems engineering, and integration for the Next Generation Air Transportation System (NextGen) and non-NextGen initiatives.
Other private organizations and government agencies and besides the FAA offer grants, which can be an excellent way to get funding to research products that could help specific areas such as law enforcement or search and rescue. For example, the Mountain Rescue Association R&D Grant program seeks to fund research, development and testing of search and rescue technology.
You may also find grants that focus on specific drone small business owners, including minorities, veterans and women. For example, the Women To Watch in UAS awards is offering a $500 micro-grant to winners.
Seek grants related to your field that don’t necessarily apply to drones, but rather technology as a whole.
Look to crowdfunding sites like Kickstarter
Crowdfunded drones can be hit and miss.
The Lily drone, for example, was a huge miss. Lily, which promised to be a sleek drone that took off when thrown in the air and could navigate around objects, launched to much fanfare in 2015 on Indiegogo with $34 million in pre-orders. The Wall Street Journal put Lily on its list of products “that will change your life,” and the drone’s cofounders were named in Fortune’s 30 Under 30. Alas, it turned out to be a mess. After a series of delays and hundreds of angry customers, Lily’s creators eventually admitted they couldn’t finance production and said they would give refunds to backers. Lily finally launched in 2017 — with none of the cool features. Our Lily drone review verified that the final version of Lily was overpriced and uninspiring.
But crowdfunding sites like Kickstarter can also be the driving force in bringing creative projects to life. Rather than seek out big investors, you can pitch your project to people. And if people like the project, they can back it. Especially if you have an excellent marketing pitch and some promise to the people who invested in it, this can be a smart way to raise money to fund your small business.
Other things you need to know about financing a drone business
Make sure you invest in training, too: You’ve got the funding, and you might have the gear. Make sure you have the proper certifications and trainings too. Some certifications, like your Remote Pilot Certificate, are a legal requirement under the Federal Aviation Administration’s Part 107, requiring you to have a drone pilot’s license in order to fly drones for business. Other trainings can simply help you level up your business.
If you’re a photographer by trade, enroll in a drone photography course. If you’re already a pro drone pilot looking to break into other niches, it probably makes sense to make courses to better understand other fields, such as real estate. If you’re an expert in a field like agriculture, but want to learn about drones, perhaps enroll in an in-person drone flying course.
Weigh whether debt is really for you: Before you do any of this, decide if it’s really for you (because it might not be). The idea of taking on funding sounds nice — unless you’re going an alternative route such as Kickstarter — you’re likely taking on debt. And yes, debts eventually need to be repaid. While taking on debt can make sense in the long-term to build your business, there’s not always a guarantee it’ll pay off.
My friend Mark Taylor, CEO of Arizona-based drone company Extreme Aerial Productions, wrote an excellent piece on whether it’s worth going into debt to keep up with the latest drone tech.
Make sure you’re getting paid: And finally, make sure you’re actually getting compensated for your work; don’t work for free! Working for free devalues the industry as a whole, and it can hurt your future self. You should even be getting paid to speak at drone conferences or consulting with other drone businesses (your knowledge is valuable!).
And practically speaking, that’s money to pay back the startup costs that you likely took on debt for in the first place.
What experience do you have financing a drone, or otherwise funding a drone small business? Share your best advice and tips in the comments below!