Requirements for In3 Completion Assurance Program™ (CAP) Funding

Advantageous Financing for middle-market projects — “faster, easier, better”

To qualify for project funding, available from a US family office, the following more detailed requirements (beyond the 4 S’s) must be met:

1. SIZE: Project funding request of $25 million or more
   • Portfolio approach: Funding can be for an individual project or multiple, related projects in a portfolio owned by a single Special Purpose Vehicle (SPV).
   • Availability/Deferral Period (Interest-only): up to ~3 years, typically
   • Debt-to-Equity: We can finance up to 100% of the budget, but just not less than $25 million; we usually prefer projects of at least $50+ million.
     NOTE: Traditional ratios for leverage do not apply. In other words, no new cash (“unexpended funds”) would necessarily be required to reach closing when using a completion assurance guarantee. See #7, below.
   
   
2. CAPITAL STACK (type of capital): Combination of debt (mezzanine) and equity, typically with a minority carried interest, to be negotiated upon completion of our due diligence. Non-recourse mezzanine debt component does not require collateral — no lien against operating assets.
   


3. INDUSTRY SECTION or “space” for new construction, retrofits, refurbishment, expansion: must involve at least some construction or implementation of tangible project assets. This is typical of most project finance, from real estate development to any type of infrastructure. Preferred sectors here. Ideally, the project would deliver positive social and/or environmental impacts.
   
   NOTE: for clarity, here’s a partial list of what we do NOT finance via CAP funding:
   1. Ventures that seek mostly or entirely working capital (technically, not project finance), or anything less than $25 million, please go here.
   2. M&A or refinancing of existing assets. Why? CAP funding requires a construction completion date against which a financial guarantee can be provided as a type of completion surety. We also use monthly transfers of capital, as close to even amounts as possible, making it impractical (but with potential solutions available) to make such funding “events” possible. See alternative 100% funding options that can accommodate lump-sums
   3. A la carte development costs or closing fees, such as debt-only (bridge or pre-construction) loans or any other transaction below our $25M minimum. Solution: consider bundling pre-construction costs with the project’s remaining development work, EPC / construction / Capital Expense budget. We don’t mind covering these minor development costs as part of a CAP finance facility.
      
      
4. STAGE of project: Does not need to be shovel-ready (if some additional development steps are needed before construction, that may be fine). Almost anything that a reasonably beyond the idea (concept/inception) stage. All the various uses of funds must be properly disclosed, verified, and fall within standard guidelines.
   
   
5. LOCATION of project: The project must be located in a country where we can do business — that is, without US sanctions against it.   Complete list of qualified countries. Ask us if you’re not sure.
   
   
6. RISK/REWARD PROFILE: Reasonable operating profit and risk (following completion of construction). Commercial customer(s) would be evident, so that the project will be financially feasible and self-sustaining. Different rules apply under a Sovereign Guarantee, where we can still finance projects that are more “social” or philanthropic.
   


7. SURETY: Completion Assurance Guarantee (definition) size and source
   • Guarantee size relative to funding: For optimal terms (ask for password), where we offer SONIA + 2.5% fixed APR loans for up to 25 years, asking for a minority carried interest, but never the need for majority control. You provide a Bank Guarantee or Standby Letter of Credit (BG/SbLC) or Endorsed Promissory Note (AvPN) of 50% or more (ideally 70-75%) of the project’s required funding, issued by a rated bank, or hire In3 to facilitate one in certain sectors. See below for other options besides a developer-issued BG/SbLC, which include involving a sponsor, considering an Avalized Promissory Note (AvPN), or for Sovereign Guarantees go here and skip to Topic 8.
   • Duration: This annual (365+1 days) guarantee instrument would remain in place at the issuing bank until the project reaches Commercial Operation Date (COD). Completion Assurance guarantees are used primarily for completion surety, but also as limited credit enhancement for the developer (such as when seeking 100% financing) — but the CAG typically remains in place only until project construction / commissioning completes. This usually corresponds to the interest-only Deferral Period, but that is just a guideline, not a necessity.
   • Source of the Completion Assurance Guarantee? CAP funding Guarantee can come from the developer if sufficient assets are available to cover the first-year issuing bank fee, or can be from a different stakeholder in the project, serving as a “sponsor“, such as an EPC firm, OEM or General Contractor. More on how completion assurance guarantees help expedite project financing.
   • NOTE regarding In3’s role with helping developers obtain a completion assurance (CAP funding) guarantee: Although In3 personnel can help guide the process, offering templates, sample contracts, and tools to accelerate understanding, getting potential sponsors on-board, we do not typically get involved in finding sponsors for our client’s projects except when we have known fiscal sponsors in our network, and under a separate management services agreement (MSA).


8. TRANSACTION: Issuing Bank & Legal Structure
   • Issuing Bank: For sovereign or bank guarantees, use a top-rated bank, when possible. We prefer banks that are SWIFT RMA or RMA Plus registered, but can usually accommodate any rated commercial bank. If you are uncertain, ask us.
   • Legal Entity: Establish a special purpose vehicle (SPV) that owns the project assets, either in the host country, USA, or United Kingdom, but other locations can be discussed.
   • Optional Escrow Account: Debt service (loan payments) and distributions handled through the SPV’s bank account, often via a mutually-appointed escrow agent, arranged by the developer.

HOW TO START: To pre-qualify and get an estimate of the likely equity split, please provide the following disclosures or use our Proposal Builder:
1. Disclosure of budgetary Uses of Funds — Customary uses of funds for mostly tangible assets, inherent in project finance.
2. Monthly draws of capital, not one lump sum. We strive for even (consistent) monthly draws, or gradually increasing amounts, tied to critical-path milestones in the construction schedules. Sample and instructions for Creating a Uses Statement and Monthly Draw Schedule.
3. To begin our due diligence, send the project summary and other “Essentials” as shown at How to Qualify (to expedite, we highly recommend that you use our available templates for the guarantee instrument, draw schedule, bank letters, etc.). Issuing bank sends a draft of the instrument verbiage that are prepared to issue when the time comes, which is the final step before financial closing, once all contracts are negotiated, agreed and signed. Following our due diligence, with a binding offer of terms accepted, we will request the actual instrument hardcopy — Bank Guarantee / Standby Letter of Credit (BG/SbLC), Sovereign Guarantee (SG), or Avalized Promissory Note (see below), initially notified via SWIFT then hardcopy sent via courier to the receiving bank.

More about Completion Assurance [Guarantee] Program | CAP funding indicative terms | FAQ

Best Practice Tips

Not able to cover the bank fees or collateral requirements of your bank to issue a BG / SbLC? Consider either approaching a different bank (fees do vary widely), or involving an EPC firm or General Contractor, if one will eventually be selected to design/build the project, to bring forward a financial guarantee on your behalf? This strategy has worked well in the past, as the EPC/GC firm often must provide a performance guarantee or completion bond. Here, a partial financial guarantee is similar to a completion bond, but issued by a bank instead of an insurance company. We call this a sponsor.

Interview a short list of well-established EPC/GC or OEM companies that wish to obtain a contract for your project(s) and select the best offer. This can greatly expedite funding and deliver benefits that outweigh the effort involved in this extra step. Best of all, if another company brings the guarantee, it is usually free to you!

If none of those options work out for a BG/SBLC, consider a bank-endorsed (with a stamp by the bank “per bank aval”) Avalized Promissory Note (more) instead.