Obstacle versus New Highway
Some developers initially see the need for a financial guarantee as a hinderance, or an obstacle, on the path to successful project fundraising. Here we offer an alternative perspective to this perception, as first impressions are often, well, wrong (or at least incomplete): our innovative use of a completion assurance guarantee is what enables funding to become more reliably available, accessible, affordable, much faster and predictable.
That’s gold when funding mid-market projects, a type of finance that is notoriously complicated, expensive, slow and fraught with pitfalls. Are we merely trading off one set of problems — the time and money associated with more traditional project finance — with a different “problem” of arranging a guarantee? No, not at all. Please read on.
It is actually quite common for first glace impressions to see the guarantee as an impediment mostly because it is “new territory.” Seeking 100% funding, with no upfront costs, limits the options available. All In3 CAP terms and conditions except the guarantee itself are below market-rates, and strongly attractive to any developer that has compared what we offer to legitimate, traditional sources. 
We shine like a beacon of light, “if it weren’t for that pesky guarantee or need for a cash deposit” (their inner thoughts — nobody has actually said this). Why this reaction? Frustration with not getting it right previously? Nobody does this perfectly, and usually not on the first try.
Have you asked potential sponsors who all said “no”? Something else?
Try this new introduction for sponsors here or Program Overview 1-page Tear Sheet.
Likely reason this is tricky at first: because In3’s Completion Assurance Program™ (CAP) just isn’t what developer or their hired financial service providers (let alone bankers) expect. Our partners invented this program to solve specific issues and achieve certain important outcomes, not just to be arbitrary or obstructionist, and anything new or novel is initially hard to grasp simply because it is new. Therefore, it takes a moment (and some “soak time”), or for some that are already well-scripted in the traditional route it may also require mental agility (a paradigm shift), just to accept the advantages of this “package” of offered funding, let alone to see how it works.
Consider that any reputable source of capital is going to ask for owner “skin in the game” — something that shows the investor they’re not taking on all the risk. An alternative to the guarantee for CAP funding is a cash deposit, typically smaller than the guarantee (such as a Standby Letter of Credit), because the latter always receive a discount. And nobody argues with cash. Compare these options
Although various guarantees can be free to the project owner, such as with a sponsor or if you happen to have non-cash assets on your balance sheet, a cash deposit is yet another route to success, worth considering, such as if a short-term lender would be willing to provide the deposit that is secured by the investment agreement or binding term sheet.
The cash alternative has become popular because the challenge for most developers is learning how to explain quite precisely how In3 works, and why we ask for a guarantee or partial guarantee in the first place. If that does not come across, this notion of project financing requiring a financial guarantee will get “lost in translation.” It might help to equate and compare it to this cash option — alternative “skin.”
Most developers are encouraged by the fact that we have proven this model works. Others have learned it well enough to realize success, so they have useful stories from which we have all learned. If they can make it work, so can you.
How do we know this? With rare exception (see 3 points at the bottom of this article), there is a way to leverage one party’s balance sheet or creditworthiness in order to gain their backing — what we call “sponsorship” — of your project. Secondly, by now, we are extremely well organized and we know how to guide you and your team to achieve your fundraising goals. But as part of learning the basics, you must do your part, which entails a “nothing to lose” initial investment of time (we do not charge up-front fees) to go deeper with the program.
Will it be worth it? If your project qualifies, we have strong evidence that this momentary pain or discomfort of learning something new is warranted, and will be worth the effort. This is simply based on the merits of the offer, which solves many of the problems inherent with project finance, namely that we are far faster, easier and better than the traditional way. More on how CAP funding disrupts this traditional pathway here.
But if you don’t have a simple answer to this question of “why” — why will it be worth it to facilitate a guarantee? — the would-be guarantor will likely dismiss it out of hand for any number of reasons, starting with the perception that it seems unnecessary to them.
Together, we radically improve funding certainty
A quick study of how it works, why it delivers such strong advantages, and therefore deserves proper consideration will come through to those you skillfully invite to bring a guarantee. What skill is necessary? Proper presentation of the facts, for one, so they don’t misunderstand what is being proposed. We also offer presentation materials we can offer to qualified project developers to help them recruit suitable sponsorship. Ask us.
So instead of the guarantee appearing as an impediment, once the guarantee’s purpose (used for completion surety, similar to a completion bond, but not insurance, and dissimilar to a loan guarantee because it stops when the project starts) and dynamics are clear, this funding model’s guarantee becomes the door-opener to a host of advantages and benefits that would otherwise not be available.
Sometimes we hear objections based on a concern that the guarantor will be at risk. If the developer is not fraudulent, this is simply not the case. Our program and its procedures protect all non-fraudulent parties and delivers sharp advantages as part of this informal joint venture partnership we form with our clients.
Learning how to handle these common objections and concerns, whether or not expressed out loud, is part of why we have prepared extensive materials, which are also learned by our Affiliates via an annual MasterClass, to help developers construct a solid platform to clearly express and listen for common concerns, including this presumption that the guarantee is an impediment. In the fullness of that discussion, most of our clients come to the conclusion that the guarantee is well worth the effort, as it remains key to gaining access to highly advantageous funding.
That said, In3 CAP is not for everyone. There are a handful of developers — those that lack financial depth, do not intend to hire anyone to help either engineer/design, procure or construct the project, and/or that do not have sufficient confidence in their own project’s feasibility — that simply cannot arrange a guarantee. See summarized list below.
Others that are dishonest, and would likely misuse the funding if they could access it, so for them, it is indeed an obstacle and other options should be explored (like being honest and non-fraudulent instead).
The third category where In3’s funding does not fit is when developers do not qualify at all for expert assistance to help them flesh out a project plan that can be used to attract a sponsor. Are they prepared to pay for the value of being coached and guided along the more traditional path, one that has far more challenges and uncertainties than the need for project completion surety? If not, then our assistance won’t matter and the developer should consider adding additional team members to build a more investible project.
Without a guarantee, how do we know the developer is able to perform? This isn’t personal, but it is a key business variable we must weigh, because we take on a lot of your strengths and weaknesses, so if an area important to project finance is going to fall short at the critically important “finish line” (the last few steps to reach closing), we will all come away empty-handed. That might not matter to you, but it does matter to us — essential to build a business that will be around for years to come — so we learned to invoke the principle of “shared risk, shared reward.” We go in together, eyes open. That means we usually charge a management services fee (subject to negotiation, of course) as part of a tight scope-of-work for pursuing the most viable alternatives to CAP funding, which is another way of ensuring that the client is willing to invest in their own success.
If a prospective client is not willing to either use the more fail-safe CAP path (where we can test the waters and eliminate most of the critical variables, mitigating the associated risks, making the funding a virtual certainty) OR invest in some of our time to raise funds from the right lenders/partners, which almost always requires a lot of agility and persistence just to grab proper investor attention, then why should we take on more risk than our clients do? This is a matter of timing and risk-sharing.
When representing a client’s project to sources in our network, we must first thoroughly vet and verify all key assertions and assumptions to avoid loss of our reputation in case important items (revealed during due diligence) are not properly disclosed, to catch errors or mistaken presumptions. We certainly will improve the quality of presentation simply because we are objective (not “in love” with the proposed deal, just fond of it :>) and have nearly three decades experience stepping into the shoes of investors/lenders. We think as they do because we are mandated by a few of them to “gatekeep” or otherwise represent their interests to source qualified opportunities. We can thus anticipate their hot buttons, concerns, and questions and meet them as the well-prepared team with the vetted deal that they naturally expect.
I’m suggesting that success with or without CAP may require more first-hand familiarity in partnership mode with us, and if you agree, we would be happy to discuss such details with the party that is responsible for getting this done as a way to provide on-the-job learning opportunities. Interested?
In other words, do not give up too easily. Don’t accept the first “no” from any one source. Hang in there. Often the funding for quality deals — those with a strong enough business case born of financial fundamentals — are within reach despite initial appearances. If a project is truly not qualified, and not going to qualify, what would be the reason? We tend to see such limitations as a call to dig deeper and spot solutions that your team and “casual observers” may have missed. Of course, In3’s CAP capital is not for everybody, but when you reach a fork in that road, we highly recommend you take it :>)
For further assistance with facilitating your guarantee, here’s a facilitation guide or download and follow INSTRUCTIONS.
Here are the only times you would be correct in assuming the guarantee is “in the way” of gaining access to our Family Office’s funding:
- When one or more involved parties are fraudulent, and they don’t want to get “caught” doing something improper. If that’s not you, read on …
- When the project is not financially feasible. Uncertainty is normal, but is there a compelling enough and demonstrable business case with reasonable risks? If not, the guarantee is not your main issue — proving you have a project worth financing (let alone backing with a guarantee) should come first.
- When the developer has neither sufficient financial depth to bring their own guarantee nor the skills nor patience to find a suitable “sponsor” or backer.
Possible solution: involve In3 on a fee-for-services basis or an In3 Affiliate to help you accomplish this. Involving someone trained in these systems ensures that you will end up bringing a guarantee that actually qualifies and reaches closing in a timely manner.
Can you think of any other situation where the guarantee is an obstacle, not an opportunity? Please let us know.