Complete Steps for CAP funding

Developers can secure advantageous capital via CAP for US$25 million or more using these steps, from inception to done

What is a “Completion Assurance” guarantee and why does In3 CAP require one?

Follow steps 1-6, Inception to Due Diligence, to apply for funding. These steps mirror the CAP funding’s Six Essentials to pre-qualify and launch our rapid due diligence, expediting first draw of funding within 30-45 days max. More on CAP funding’s main purpose and advantages. Or, for experienced developers of mid-market projects, four notorious problems CAP funding solves as well as when CAP is the best or only option for funding through us.

NEW for 2022! Instructions for developers to pre-qualify for funding, including helpful tips for securing the guarantee instrument, Step 3, below: Download PDF

Check to ensure the project size and industry are a fit (per In3’s sweet spot) and identify the project name, industry sector, and total funding requested.
Tip 1: Developers working with an In3 Affiliate can ask their advisor if their project fits with In3’s funding mandate. If you are not yet represented, refer to these 4 “S” cornerstones to make certain your project is able to qualify.
Tip 2: Synopsis of what it takes to secure CAP funding: here (1-page cover letter). Funding request must be US$25 million or more ($35M+ preferred), where funding can be in the local currency, at these indicative terms, with the first 4 of 6 “Essentials” used to quickly determine funding feasibility. This ensures that no time is wasted.
Goal: Pre-qualify via the steps outlined below, to then move forward with our rapid Due Diligence and, if all is in order, make a binding offer to fund the project(s) via contracts negotiated in good faith.
Result: Identify the project or portfolio NAME and total BUDGET (in $ or €) as well as the funding requested.
You may also want to use this basic information to register in our tracking database. Although not required, registration will enable you record the developer’s basic profile, contact information, project name/location, project industry sector, total project budget, and total required In3 funding. When you register, indicate whether the project is new construction or retrofit, and (if known) the preferred type of guarantee to be used. Options Guide by type.
We will acknowledge receipt and, if aligned, express an interest in proceeding.
Uses of Funds — document project cost categories and amounts / %’s for each category. See our Guide to Creating a Uses Statement (4-page PDF) with several examples on pgs 3-4.
Result: We acknowledge receipt and whether to proceed. If you send us a separate email with the target guarantee face value amount (in US$ or Euros), and project (unlevered) IRR, we can usually offer preliminary terms. Binding terms available once we complete our due diligence, Step 7.
NOTE: We usually don’t charge an application fee, so you literally have nothing to lose.
Propose Financial Guarantee type and Instrument Verbiage: Developer asks their bank or the sponsor’s bank to propose the verbiage for the guarantee instrument (usually a Standby Letter of Credit or Bank Guarantee, SbLC/BG, MS Word template here), but we can also accept either a Bank-endorsed Promissory Note or a Sovereign Guarantee from the Ministry of Finance if working in a country that can issue one as part of public/private cooperation.
Download all templates via CAP Proposal Builder — a dataroom of helpful tools and templates
Note that just an unsigned draft of the proposed instrument is all that’s needed to start, indicating the name and branch location of the involved bank. There is nothing binding … no obligations or fees paid at all. This “specimen” or “indicative” draft of the instrument can be sent as a standalone Word or PDF document via Email for our bank’s review and approval. Once approved, we will ask for the draw schedule (step 4) and then the name(s) of the involved bank’s officer(s) that have agreed to the proposed guarantee or bank’s Aval at Step 5.
See also: A-Z on Capital Guarantees or INSTRUCTIONS and tips for this step: Download PDF
Result: We will review and offer either feedback or approval of the proposed Uses of Funds and instrument verbiage. Note: An Expression of Interest (EOI) can be arranged at this point upon request.
More in-depth: Click on the image for BG/SbLC “essentials” (or PDF here) as a guideline for those requirements or download appropriate templates to be relayed to the banker you or the sponsor will ask. SGs and AvPNs are different. Comparison
WARNING: Bankers often misread this request when they are unfamiliar with this program’s innovations. There are some subtle but important differences to standard (mainstream) practices. Read Communicating with bankers about the qualifying guarantee.
Propose the monthly draw schedule using relatively consistent monthly amounts, or increasing amounts (the funding bank will not approve a “whoosh” of large initial draws). Sample draw schedule on page 3
Result: The funding bank approves based on the acceptability of the instrument’s verbiage, stated uses of funds and monthly draw schedule.
Request RWA letter from issuing bank. We will offer the name/location of the funding bank (the project’s package, Step 6, to be delivered to In3 within 2 weeks) for the issuing bank to provide an RWA letter sent via Email. RWAs are like a bank’s Letter of Intent (all templates available here). There are also work-arounds if the involved banker does not like or understand RWA letters. Ask us.
Result: Acceptance of the RWA letter or equivalent confirmation of the bank’s intent to provide the instrument when the time comes — once all the funding-related contracts are in place.
Developer provides the balance of the package, including a project summary, financial summary and all related documents and disclosures needed for Due Diligence. A dataroom can be used if files are numerous and/or large.
Result: Project pre-qualifies for In3 advantageous CAP funding. In3 acknowledges receipt of the complete file or requests further information until the project can enter streamlined Due Diligence.
See also: Guarantee Tips or Tips for Mid-Market Project Finance Success and What to Avoid
Remaining steps carried out by In3 Capital Partner with final terms memorialized via a Loan Agreement and Share Purchase or Subscription Agreement.
Due Diligence to Offer: We conduct formal due diligence – typically lasting just 2-3 weeks. We are less stringent than most project financiers, but still like to see reasonably low or no commercial risk (such as long-term supply/offtake agreements), pro forma projections with transparent assumptions using standard accounting practices, detailed site description, developer profile, remaining pre-construction steps, if any, and all disclosure documents organized and easily located. For more on our diligence process, see this Financeability Checklist.
Result: If all goes well, a binding offer for the loan (a Loan Agreement) plus an equity carried interest (via a Share Purchase Agreement).
All contracts are entered to reach closing, including the sell-side (developer’s agreements with service and capital providers) plus any side agreements, developer establishes SPV, etc. Then the guarantee instrument is delivered (see the more detailed protocol, “Guarantee Instrument Delivery to Capital Draws” phase here).
Result: Financial closing happens quickly upon receipt of the hardcopy instrument at our bank.
Fund & Launch: Funding flows per draw schedule … until Commercial Operation Date (COD). Capital resources are used as stated in Step 3. Because project is completely funded, vendors are reliably paid on time. Guarantee is renewed as needed so that monthly drawdowns continue; parties work together to resolve issues until project completion and commissioning.
Results: Any unforeseen circumstances raised and addressed in a cooperative manner. Project reaches COD, with any subsequent projects funded through the same finance facility also completed/commissioned; BG/SbLC or AvPN guarantee is allowed to expire and is removed on its maturity date.