Paying up front
The appeal of paying up front is greatest for those for whom money is tight and the "discount" compared with pay as you go looks appealing.
The risks are obvious and the risks of giving foreigners and foreign businesses money up front are multiplied many times over.
The time in business issues needs careful review. There have been many instances where a business has gone bust and the previous owner has bought the assets back off the receiver and set up again under the same name but with a trail of creditors getting nothing. These phoenix businesses rise from the ashes of the old business and quite often go bust and the cycle gets repeated. And why not, going bust is often a good way of starting with a clean sheet no matter who gets hurt.
The need to take money up front is because the business owner and or the bank are not prepared to put enough money in the business in the first place. And why is that - perhaps because they dont want to lose it or their house!
Many FTO don't own their aircraft, they are leased so there is no collateral in them to borrow money with. Likewise any premises are also likely to be rented so no collateral there either.
So you can see that starting a FTO can be a relatively cheap thing to do especially if most of the working capital is provided by the future customers.
This is Ok as long as things are going OK and the business is growing. Once the growth stops or even falls then watch out, the collapse can be quite sudden.
To see this you only have to look at something like the Fairpak hamper scandal that happened here last year. The parent company were robbing Peter to pay Paul so to speak and when the time came to meet its obligations it could not.
So my take on paying up front is DONT unless you can afford to lose the money. If you can afford to lose that sort of money, you dont need the discount so dont need to pay up front. The other issue with paying upfront is that even if the FTO is sound, you lose control over your money.
Remember, it is not the price you need to worry about but the cost.