Keys to getting support for In3’s CAP project funding
Assuming you want to pursue our Family Office’s funding via In3’s Completion Assurance Program (CAP) — compare to other bespoke funding options at in3capital.net/alternative-in3-mid-market-project-funding — CAP’s complete steps are in3capital.net/steps-to-project-fundraising-success-using-cap
Here’s a guide to deciding which guarantee to use: in3capital.net/deciding-which-financial-guarantee-promises-the-most-advantages
In most cases, this guarantee is a request for at least partial coverage of the total budget via a bank’s Standby Letter of Credit (SbLC) from a sponsoring firm that gets involved (as a vendor, typically) in the project. If you’re ready to move forward with the first few essentials (using this guide), ask for our EPC/GC/OEM briefing that can be tailored to your own situation. It provides a clear explanation of why we structure financings this way.
The “right” backer is usually a well-established vendor (services or major equipment) that you can get interested in working on or supplying equipment to your project(s). That requires project developers to show they’re ready to interview and select/contract with the leading firm. The selected firm would, in exchange, offer a “demand guarantee” (a financial instrument) that helps to secure all the required funding and to incentivize and focus the parties on completion of the project assets. This Completion Assurance is different than insurance bonding, as it requires a bank-involved instrument with face value of at least 30%, but preferably closer to 75% (in aggregate), of the project’s total budget.
Consider involving an unaffiliate third party guarantor by hiring In3 to assist with making those arrangements. This premium service is arranged on a bespoke basis with select projects under a Management Services Agreement (MSA). more
Tips on arranging sponsorship:
- If the total funding requested is above ~$50M, CAP funding guarantees can also be brought to us in 2-3 stages or tranches, decreasing costs for getting funding started.
- You may need to bargain with prospective backers to see what it would take to get them on board with this guarantee, at least in theory, assuming everything else checks out and is to their satisfaction.
- To gain bargaining power, you may want to line up more than one potential backer, and negotiate based on clear scope-of-work (role and responsibilities) per their initial cost estimates. In practice, clients have found that by paying them an enhanced fee for their services (all payments to such vendors are assured, from our funding partner, based on draw schedule that gets pre-approved and locked down by our funding bank) they are more likely to offer a larger guarantee. Sometimes a modest equity interest in the operating project helps demonstrate your commitment to gain-sharing.
Offering a carried interest is up to you, of course, but history shows you actually give up less equity overall if you can get the guarantor on board for a larger proportion of the budget.
For example, you might offer them a modest share (5-10%?) of the cashflows for twice as large a guarantee, increasing it from, say 35% of the project’s total budget to 70%. That increase would keep net ~35-40% more equity in the owner’s hands, making the offer of sharing a modest equity stake with the EPC/GC firm a substantial gain in preserving your own rights to cashflows. Such improvements are worth considering as part of preliminary “what will it take” (to get them on board and committed) discussions.
Keep in touch with In3 as results unfold because as we may be able offer coaching or other assistance.
Thanks for your interest and diligent efforts with In3’s CAP funding program. Here’s to successful financial closing, construction and project launch!