Summary of Requirements

In3 CAP™ Funding Requirements Checklist

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

To qualify for project funding available from our US family office partner, the following screening requirements must be met, which we call the 4 “S” Cornerstones.

Then, below that, you will find a set of more specific requirements (beyond the 4 S’s), which must be met.

Innovative CAP approach streamlines qualification

To help navigate the inherent complexity of dealing with banks or any other traditional pathway to project funding, In3 CAP’s innovations define “fit” as any project or portfolio(s) of projects that upholds these four cornerstones:

4 “S” Cornerstones of In3 Completion Assurance Program (CAP) — faster, easier, better

1. SIZE:  $25 million or more per project (prefer $50m+); if less than $25m, consider building a “pipeline” or portfolio of multiple, related projects under one facility.
2. SECTOR or SPACE: Delivers positive impacts, ideally (or at least does no social or environmental harm) – more than 30 industries get preferential treatment.  The most active sectors are presently waste-to-value, regenerative real estate, sustainable food systems, affordable housing, and renewable energy.
3. STAGE: Almost any – does not need to be “shovel-ready” (whatever that means per industry expectations). CAP funding is fine with covering the costs of additional pre-construction development work, so long as the majority of Uses of Funds includes tangibles like land, buildings, equipment.
4. SURETY: Investment (equity and/or debt) can be covered under a financial guarantee of some sort – sovereign, bank, or corporate – for up 30-70% of the total funding (100% is also fine). This is not a loan guarantee, but instead qualifies for favorable and generous terms with far less stringent due diligence, faster, and more reliably – with greater risk tolerance and thus, certainty.  

Of course, there are often creative solutions to each of these basics, assuming a willingness to make some sort of commitment to working with us as the preferred pathway to funding.  By “commitment” we mean working in good faith to explore options (including possible sources for a financial guarantee) then selecting the one option with the greatest mutual benefit. 

Specific Qualifications for CAP Funding

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 ~5 years: 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. In some cases, $100M or above or a portfolio approach is going to get more attention and prioritization.
     NOTE: Traditional ratios for leverage and debt service do not apply to CAP funding. In other words, no new cash (“unexpended funds”) would necessarily be required to reach financial 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. In some cases, we can offer non-recourse and non-repayment (no loan) but still a minority equity carry.


3. INDUSTRY SECTOR 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 consistent amounts as possible, making it impractical (but with potential solutions available) to make bulk transfers of funding or “lump sum” financing workable. See alternative 100% funding options to accommodate M&A
   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. If you really don’t want to bundle costs, but seek at least $25M, see alternatives.
      
      
4. STAGE of project readiness: 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 industry 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 and commissioning). Commercial customer(s) would be evident, at prevailing market rates, so that the project will be financially feasible and self-sustaining. The same guidelines apply to feedstocks, or other raw materials, which can be secured via purchase contracts or MOUs or other signs of commercial risk mitigation. We can accept other risks, such as technology or execution risk, but business risk must be reasonably low. Think in terms of inputs and outputs — and consider insurance or going deeper with vendor and customer relationships once you have In3’s basic acceptance and finance feasibility.
   We are quite flexible about anticipated upside or the “reward” side of risk, usually measured as unlevered Internal Rate of Return (IRR) for the life of the financing.
   Different risk/reward 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), when there is a debt component, we typically offer SONIA + 2.5% APR loans for up to 25 years, asking for a carried interest, but never the need for majority control. To make this work, the client or a sponsor or a Done-for-You (DFY) premium service can demonstrate that a Standby Letter of Credit (SbLC or Bank Guarantee) or Endorsed Promissory Note (AvPN) of 50% or more (ideally 70-100%) of the project’s required funding, can be issued or endorsed by a commercial bank. Although larger banks typically offer stronger instruments. See below for other options besides a developer-issued BG/SbLC, which include tapping a sponsor, using 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, or any country we can both do business.
   • 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.
   • TO START:
     • Use In3’s Proposal Builder then apply for funding | At these indicative terms
     • Complete steps to pre-qualify and fund projects
     • Other resources | FAQs

Best Practice Tips

Not able to cover the bank fees or collateral requirements of your bank to issue a qualifying guarantee? 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 works on occasion, as the EPC/GC firm often must provide a performance guarantee or completion bond, which some banks may be willing to back as their own (bank-related) guarantee, either a Bank Guarantee, Payment Guarantee, or Performance Guarantee. 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.

If the above approach does not solve the “choke point” due to lack of available cash to cover the bank’s SWIFT fee, assuming the source of said guarantee is provably legitimate, talk with us about what can be done to get around this.

To avoid fraudulent guarantee providers, the better practice is to first interview a short list of well-established EPC/GC or OEM companies with a “strategic” interest in your project — those that wish to obtain a contract for your project(s), usually with an incentive for doing so — and select the best offer. This can greatly expedite funding and deliver benefits that outweigh the effort and any costs (paid by our funding anyway) involved in this extra step. If another company brings the guarantee, it is usually free or at least affordable for you!

If none of those options work out for a BG/SBLC, but there is an asset owner with financial depth involved, consider a bank-endorsed (with a stamp by the bank “per bank aval”) Avalized Promissory Note (more) instead. As a last resort, consider In3’s Done For You guarantee services, if your project fits these secondary criteria (PDF) and can afford to cover the deposit for In3’s management services.

Before giving up on CAP funding, please note if CAP is your best or only option?