Gertrude is right about financing costs. Giving say a 10% discount to a customer is an awfully expensive way of raising cash; one could get it on a credit card for less than that
However, the motive for schools/clubs (the terminology is largely interchangeable, in the UK) doing this is not just to raise cash but also to stop them walking out if they get p1ssed off with
- bad service
- crappy planes
- "funny" instructors
and I think the above are more common than schools going bust. Basically if you pay up front, the school has got you over the barrel.
I've been in business for 32 years and would feel really sick to be putting customers in that kind of position.