What is CAP funding “security” and how does it work?
When In3CAP funds 100% of the required capital, and the project developer contributes no unexpended cash, Security provides a proof point that you are committed — that you have (short-term) “skin-in-the-game”. This innovative method of securing project capital, once contractually arranged, guarantees delivery to the project’s Special Purpose Vehicle (SPV) bank account, as well as demonstrates that the developer/owner is materially “at stake” during construction.
In effect, the project developer is securing their position in this funding transaction.
When developers can bring unexpended new cash capital alongside CAP’s funding — in the form of senior loans, tax credits, or convertible instruments — that helps to proportionately reduce the amount of security needed for the rest of the project funding. Such new cash also ensures that the project owner is taking on a meaningful share of the risks longer term.
Not clear about when Security is needed? CAP funding’s model uses security of some form to arrange advantageous funding for any new/expansion, retrofit or refurbishment construction project in our sweet spot, $25 million or more ($50M preferred). To gain CAP funding’s advantages, clients are asked to facilitate at least one form of security that assures project completion and delivery — usually a cash deposit or a bank-involved Standby Letter of Credit (SbLC).
- Compare SbLC with cash deposit — discover which one works best for you
- Can’t bring either a cash deposit or SbLC as security? There are additional Security options, depending on your location, access to non-cash assets, bridge loans, or potential sponsors, and/or if your banker knows you are creditworthy. Browse all security options
- What is a Sponsor and how might I obtain one?
Know more about “Completion Assurance” Guarantees (CAGs) an asset-backed financial instruments.
Check out these Practical tips for sourcing CAP Guarantees or CAP funding’s Frequently Asked Questions
Still unclear? Request assistance from In3’s team or your In3 Affiliate?
About CAP funding: CAP’s 100% funding without a loan to repay, within reach at any reasonable stage of readiness is probably unique in the capital marketplace. It is the only project funding that uses security just until all the funding is received (in the case of a cash deposit), or until the project is delivered (for CAGs). “Delivery” occurs once construction is complete and the project is commissioned to begin commercial operations. That milestone is called Commercial Operation Date (COD), when annual CAGs are then allowed to expire on their “maturity date” and fall away.
If you opt to use a cash deposit, it is returned in lump sum on the final drawdown of funds, and can then be re-purposed for more project funding or other uses as you wish.
That’s it! Questions? | Indicative Term & Conditions | In3 Guide to Bank-involved CAGs
Everyone keeps their eyes on the prize of a completed project. Projects then begin to generate cash flows for the equity partners to repay the investment. The exact equity split is subject to negotiation, depending mainly on how much the cash or CAG gets leveraged — which can be as much as 3-4x.
How to get started | Register your project once ready for In3 vetting