Project Financing/Bridge Financing
Our project financing/bridge financing program provides up to 100% financing to projects requiring short-term loans of up to two years. Our program is unique in that we require a financial collateral such as a standby letter of credit (SBLC) or bank guarantee (BG), rather than hard assets such as real estate, to secure the loan, which will be drawn from our existing credit lines at domestic/international banks. Because the loan must be repaid within one or two years, the program is best suited for firms that expect a significant liquidity event, i.e., permanent financing, refinancing, capital infusion, sale, etc., within that timeframe.
Our minimum loan amount is $5 million, with a maximum amount of $500 million. We will consider commercially viable projects in virtually any geographic region including North and South America, the Caribbean, Western/Eastern Europe, Australia/New Zealand, Southeast Asian (ASEAN) countries, China, India, Africa, and the Middle East. The loan proceeds can be used as equity capital, 100% financing, investor buy-outs, down payments, refinancing’s, etc.
Our project financing/bridge financing program requires a financial guarantee, typically a SBLC/BG, that is usually issued directly from the Borrower’s bank to our bank (download an example of our SBLC draft language here). Conducting the transaction on a bank-to-bank basis helps provide greater security and transparency throughout the process. The borrower can expect to receive approximately 60%-70% LTV of the instrument, after deducting interest and fees. For example, a $10 million SBLC/BG would yield approximately $6-$7 million, with the Borrower responsible for repaying a loan amount of approximately $9 million.
Project Financing/Bridge Financing Program Benefits
- 100% financing potential for Borrower with no upfront fees or payments;
- Borrower can retain a higher equity stake in the project versus traditional equity financing;
- Ability to fund quickly in a few weeks as opposed to months for conventional bank financing;
- No long and expensive private placement memorandum/process needed;
- No restrictions on use of capital as long as used for prescribed purpose.
To Financial Investment Partner
- Lower project risk as loan guarantor versus being a true equity investor;
- Ability to continue to earn interest on funds used to secure financial guarantee;
- Potential to secure project equity without directly risking capital.
To Supplier Investment Partner
- Direct deal participant versus project supplier;
- Upfront receipt of 100% of billable costs directly from loan proceeds, versus a small down-payment with the balance being paid after provision of services, minus any project holdbacks, in a conventional relationship;
- Locks supplier in for duration of the project, while potentially securing their position in any future phases/projects the developer may undertake.
- Gideon and Borrower sign loan documents.
- Borrower obtains financial guarantee–Standby Letter of Credit (SBLC) or Bank Guarantee (BG)–as collateral, from their bank or Investment Partner*.
- Borrower’s bank issues SBLC/BG to Gideon’s bank as Beneficiary. Under certain circumstances the SBLC/BG might need to be advised/confirmed by an intermediary bank.
- We draw down on our liquidity with our bank based upon: i) viability of the Borrower’s project or company; ii) size and strength of the bank issuing the SBLC/BG; iii) the financing agreement between Gideon and Borrower.
- We disburse the loan to Borrower after deducting: i) interest reserve; ii) issuing costs; iii) fees.
- Upon maturity, typically one year, Borrower repays the loan, or requests a one-year loan extension, which would require paying bank interest and fees for an additional year.
- Upon loan repayment we restore our liquidity with the bank and the SBLC/BG is released.
- If Borrower fails to repay the loan, we instruct our bank to call upon the instrument.
- Borrower’s bank will pay the claim upon the SBLC/BG and foreclose Borrower’s collateral used to secure the instrument.
*The Investment Partner—a supplier such as a solar panel manufacturer or EPC Contractor, or financial investor willing to invest in the project—can issue the SBLC/BG on behalf of the Borrower, which would likely necessitate an additional agreement between the Investment Partner and Borrower providing the Investment Partner with an equity stake in the project. However, the advantage to the Investment Partner is that they are providing a financial guarantee, rather than actual cash.