What Makes CAP Funding Different?

Introducing In3’s Completion Assurance Program™ (CAP), an innovative structure to fund mid-market projects worldwide

This article captures our flagship funding program’s uniqueness, overarching purpose, goals, benefits and advantages 

Faster, easier, better

Delivering the advantages of affordable, non-recourse debt and a true equity partnership, In3’s Completion Assurance Program™ (CAP funding) stands apart from traditional project finance. Developers gain access to streamlined, fast and flexible capital without the funding partner expecting a controlling interest, using a combination of equity and mezzanine debt, even when teams seek 100% financing, or combine CAP with some Senior Debt, or if at a relatively early stage of readiness/bankability.     

Even more important to anyone who knows how challenging it can be for developers to reach predictable closing (an “adventure” at best), we can tailor CAP funding to the situation at hand, so long as there is at least a partial Completion Assurance guarantee on the table. This bespoke funding isn’t for everyone, but it does resolve the notorious problems associated with arriving at financial closing without unsavory, last-minute surprises; it eliminates much of the guesswork, saving time by going slower at first (to secure a guarantee) in order to reach financial closing faster and more reliably. 

CAP’s pre-qualification process serves to avoid the “blind alley” of traditional project funding, transforming it from “one size fits [almost] nobody” to “one flexible program that delivers it all.”

How?  Who is involved?  In3 manages a type of “committed capital” from a private, global, family office Impact Investor based in the US, which we offer as the preferred solution for funding mid-market projects when there is a financial guarantee and just a few other conditions are met (for example, we prefer relatively consistent monthly draws, not lump-sum distributions of all the funds right away).

We’re largely agnostic about the industry sector (so long as it does not cause environmental or social harm), where the main difference is CAP funding seeks to use a financial guarantee to ensure project completion. 

In the unlikely event of a lack of completion (developer default), the guarantor could have rights to step in and finish the job.  The “completion assurance” guarantee instrument is not called.  Once ready to begin commercial operations, the guarantee expires and is removed, then the partners rely on the equity split not senior leans or credit insurance for repayment of the loan component.

Guarantees are not always workable, but CAP funding is likely the fastest, most affordable and reliable source of capital available for qualified projects in the countries where we work.  There are no up-front fees.  How We Work

1. To pre-qualify, request our worksheet for describing CAP funding’s Six Essentials.
2. To make a winning proposal, use our CAP Proposal Builder (provides handy tools and templates)
3. Complete, end-to-end CAP process in 3 stages. 

Spotlight:  CAP Funding Objectives

Through its “Next Gen” Guarantee Program, In3 Capital aims to:

• Mobilize private investment (equity and debt) for strategic projects or sector support — we give preference to these 30 sectors.
• Reduce costs and improve financing terms (capital becomes more affordable, provided more quickly and reliably, and for longer loan periods) for project developers, their sponsors, service providers, and governments
• Greatly accelerate the speed at which impact projects come online while ensuring the long-term sustainability of such projects.
• Build a diverse portfolio of long-term projects, without a pre-determined calendar date to divest or sunset the assets, like most funds require.  The available capital is not organized as a fund.  It is a finance facility. 
  Post-COVID update:  This target diversity now proves that less bankable projects (earlier stage, located in more remote locations, involving smaller or even unrated banks, and/or via first-time developers) can and will become the engine of positive social and environmental change in our economy.  In 2022, a project reaching financial closing with a very small sending bank in Africa that surprised us.
• Mitigate key stakeholder risks to enable long-term financial viability and sustainable value, including positive social and environmental benefits.  Such projects often change lives!
• Set a high bar for other investors to offer comparable terms. Presently, we have no peers … only China-based investors would finance 100% of similar projects, for which they usually expect a majority stake, or onerous terms, with a reputation for outmaneuvering developers to eventually take control.
• Enhance the credit of those who would otherwise not be able to access affordable project finance — especially when they wish to maintain control and/or a controlling equity carried interest.  Unlike traditional loan guarantees, that must remain in place until the loan is repaid, we use a financial (completion assurance) guarantee that goes away once the project begins Commercial Operation.  This is further explained below.  Even if there is more work/expense to reach shovel-ready status, we do not ask for or otherwise expect (or even want) to take control.

Funding Program Features

• Financial guarantees enable balanced risk allocation from private-sector project developers to banks (via a Bank Guarantee, Standby Letter of Credit or several other forms), or between the company backing a project and our bank (such as via a bank-endorsed Promissory Note, issued by the project company or a backer), or private investors working in cooperation or partnership with governments (via a Sovereign Guarantee) on projects that benefit the country. Compare and decide which type of guarantee will serve you best here.
  Note that a Bank Guarantee or Standby Letter of Credit (BG/SbLC), or bank-endorsed commercial Promissory Note, stays in place during the project pre-construction, construction and commissioning phases, until reaching Commercial Operation Date (COD), to ensure that the project gets completed. 
• Such capital/loan guarantees are suitable for mid-market project financing and can take the place of project, corporate or sovereign-issued completion bonds.  Developers and sponsors may still want to use such insurance, but here the capital can flow (a monthly draw schedule is established) without a loan guarantee, collateral lien, the need for control by the lender/investor, nor several other more traditional project financing requirements. 
  See Success Tip #5.2 for more about why insurance products are not a suitable alternative to a bank-related financial guarantee.

Program Advantages

What makes this Completion Assurance Program (CAP) unique or at least advantageous? See benefits below.  

• In3’s capital partners are flexible and adaptable to multiple project types and phases, as well as contractual structures
         –  Tenors may extend to up to 15-20 years or more
         –  Capital costs are now based on prime lending rate SONIA plus 2.5% APR, no lien (mezzanine, not senior debt)
         –  Developers may optionally involve In3 or their Affiliates (joint venture partners) or project technical partners in arranging EPC services, as the owner’s engineer, as a general contractor (responsible for building the project assets, usually delegated to a local construction firm), for operations & maintenance, construction management, or for technical design/engineering services, business planning, deal packaging, pre-vetting (due diligence preparation), putting together datarooms, etc.

Additional risk insurance can be obtained for a variety of hazards, though with a capital/loan guarantee, such insurance may not be required. Examples:

• Contractual risk e.g. payment risk, performance risk, etc. — with CAP, the project would be fully funded.
• Political, Currency and Regulatory risk e.g. change in law, negation or cancellation of license, tariff adjustments, local currency convertibility, transferability, or expropriation, war and civil disturbance, etc.  We do not require such insurance, but you may still want to obtain such coverage.  
• Performance risk (or volumetric/generation risk) or Completion risk — again, developers may want to ask their EPC/General contractor to cover these hazards, but we do not require such insurance.  

Similar to a completion bond, however, our Completion Assurance Program provides a strong incentive to work together in a cooperative manner to make sure the project assets ultimately get finished and commissioned.

How is CAP different?

Traditional loan guarantees enhance the creditworthiness of the developer/borrower while the loan is outstanding — from origination (first draw) until the loan has been repaid in full.  With CAP’s financial/bank guarantee (same as a Standby Letter of Credit in the US and some other markets), or bank-endorsed Promissory Note, we only ask for it to be operative until project completion — until it reaches Commercial Operation Date (COD).   

This is much more focused and thus sharply different from a traditional loan guarantee, where an In3 financial guarantee serve as completion surety and to filter out malfeasance and fraud.  Thus, our Completion Assurance Program provides direct return-on-investment in time and effort, inclusive of any fees (reimbursed out of invested proceeds), by offering far more flexible qualification, and once pre-qualified (a “test run” that puts you entirely in the driver’s seat, with no obligations or costs to obtain a binding offer), radically improved funding certainty, enabling easier due diligence, faster closings and more attractive capital terms and conditions.  

Further, the completed project assets are unencumbered by Senior Debt liens (we do not use a traditional capital stack) enabling the developer to use their completed assets as collateral for subsequent financing.  Credit scores and borrowing power actually go up as additional projects get funded and completed. 

Benefits of In3’s Completion Assurance Program for developers and their stakeholders:

• Improvement of the overall credit quality of the investment through the use of a SWIFT guarantee instrument to mitigate credit risks, which qualifies the asset owners for better terms, such as either lower interest rates, or keeping a higher percentage of equity ownership, or both
• Saves significant money over non-guaranteed loans — mezzanine debt at SONIA + 2.5% annual interest can be well below market rates for similar loans, available for up to 25 years, with up to 3 or 4 years principal deferred (interest only), nonrecourse, with no penalty for early repayment.
•  
• Saves significant time/effort/energy shopping for the best terms, only to later discover there’s a catch.  Here there is no catch — we disclose everything up front, clearly distinguishing between all the pre-negotiated terms we offer, and what remains to be negotiated, which mostly just the equity split.  We hear that we offer the best terms available anywhere for 100% and/or early-stage financing of mid-market projects.  
• Reduction or elimination of key risk drivers which are beyond the control of private investors — including the most important one, the risk of not being able to raise the capital necessary to finance the project(s).
• Immediate project bankability, sustainability, and replicability.

In3 Capital Group is approaching our 30th year, with a solid track record as a provider of financial services and results for our clients. We pride ourselves on telling it “like it is” and full transparency is part of that.  Most investors won’t explain their perspective, or offer feedback at all.  They’ll either like the proposal or they’ll pass (refuse), out of an abundance of caution.

Will it be worth it?

Explore the answer to that for your situation via this roadmap.  We cannot make that call; only you can.

We will affirm that, on the one hand, this funding is not for everyone.  Some won’t qualify or need to take advantage of the program’s unique ability to make marginal or even unbankable projects suddenly investible.  Not every developer has such constraints, and in those cases, if we cannot provide better terms & conditions (we usually can), so you can take advantage of CAP’s rapid/predictable closings, then we don’t deserve your business.

On the other hand, we might just be the “right people” for your project(s) as equity partners.  If you can obtain funding from two different sources at the same basic cost-of-capital, which one should you favor?  The one that shares your vision and values.  We’re in this for the right reasons, according to our sense of purpose and priorities.  Do we have that in common?  We can finance almost anything, but sometimes a partnership can rely on strengths others would not share, so our “impact” focus should factor in.  More on In3’s investment strategy.

Through mobilization of private financing and mitigation of credit risks for impact projects, CAP supports sustainable economic growth and with scale and volume of completed projects on the rise, may eventually begin to mitigate and then reverse climate change, helping countless people and their families thrive in the face of such adversity. 

In other words, this program, through your projects and the positive social and environmental impacts they have, achieves twin goals of poverty reduction, improved health & security, and ecosystem restoration for all.  

In3 funding program’s simple, 3-stage CAP process outline.

How to get started and submit a winning proposal for CAP funding

After reading the above link, use our 2-page Pre-qualification Worksheet, then Register your project here

If uploading a document, be sure to include an indication of the total budget requiring financing and categories of intended uses of funds.