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 use 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 is drawn from our 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 time-frame.
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 or BG, that is usually issued directly from the Borrower’s bank to our bank. 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 70% LTV of the instrument after deducting interest and fees. For example, a $10 million SBLC/BG would yield approximately $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 third-party–such as a supplier, EPC Contractor or financial investor–can issue the SBLC/BG on behalf of the Borrower, which would likely require providing the Investment Partner with an equity stake in the project. The advantage to the Investment Partner is that they are providing a financial guarantee, rather than a direct cash investment.