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Q: Who is the
Provider?
A:
The Provider is the person that handles the funds of a consortium of
investors that are willing to get into
this kind of investment due to the security, speed and the above
average
return it offers.
Q: Who are
the
investors?
A:
A combination of financial institutions, capitalists, etc.
grouped for carrying into effect some financial operation requiring
large resources of capital.
Q: Why
doesn't the Provider use the capital of his investors to fund the
project?
A: Investors are in the money business, not in the lending business.
They seek fast, good and secure return on their money which the lending
business does not offer.
Q: Can you
send the BG to present to my bank now?
A: The BG/SBLC will be issued specifically
for the transaction that you and your bank are preparing for the
purpose of financing
your project. In order for the Provider's bank to issue the required
instrument, it has to receive the pay orders (bank-to-bank) which
will tell the provider's bank that the lending bank is ready to receive
the instrument for a transaction that actually exists. At this point,
the
issuing bank will use the funds that are allocated by the Provider to
issue the instrument in the specific amount then delivers it
to the lending bank. As you can see, the Provider can not allocate such
huge amounts of money in his bank indefinitely for a transaction that
has not yet been agreed upon and only to hope that there will be one.
However, the Provider can send the pre-advice to the lending bank at a
cost to the client.
All fee-based services may be requested from us in writing and the fee
must be deposited in a designated escrow account and be released to the
Provider once the service has been completely performed.
Please be aware that this does not guarantee the success of the
transaction as the lending bank might ask for that just to satisfy its
curiosity with no intention of following through.
Q: My bank
wants to deal directly with the collateral issuing bank, can a
bank-to-bank procedure be arranged?
A: We, in fact, encourage such procedure
because it is faster and convenient for all parties. A bank-to-bank
communication and procedure can be easily established once you send us
a copy of the letter that you should receive from your bank
approving the loan.
However, if the lending bank will not write the client an approval
letter, the Provider can have the issuing bank contact the lending bank
at a
cost to the client.
Furthermore, if the lending bank wishes to have a pre-advice sent to
it, our BG issuing bank will SWIFT it to the lending bank at a
cost to the client.
All fee-based services may be requested from us in writing and the fee
must be deposited in a designated escrow account and be released to the
Provider once the service has been completely performed.
Please be aware that this does not guarantee the success of the
transaction as the lending bank might ask for that just to satisfy its
curiosity with no intention of following through.
Q: I can not
find a lending bank on my own, can you provide one?
A:
Yes, we can provide the lending bank that will handle your
transaction with our issuing bank. Providing both the lending bank and
the collateral issuing bank is called "Structured Financing". The
Provider can have this organized at a cost to the client of 6.0%-16.0%
of the
loan amount. The process takes between 30-45 days.
Q: How will
the offer work with a private lender or an investor that will accept
the collateral-first procedure?
A: The private lender or investor
will instruct his bank to proceed with endorsing the pay orders on his
behalf, receive the collateral, verify it then make the loan and the
payment.
Q: Why does the
lending bank have to send the pay orders first before it receives the
instrument?
A:
We reserve the funds and cut the instrument for the purpose of the
transaction in hand, therefore we need the bank's promise to pay but
only if they accept it, if not, it can send it back with no obligation
whatsoever. That is why the pay orders are conditional. We simply need
a recourse if the bank decides to keep the instrument but not pay for
it, or really take its time to do it- its our only safeguard.
Q: Is the
lending bank under any obligation during
the process?
A: No. The
only time the lending bank is under any
obligation is when it receives and accepts the instrument
used as
collateral,
then its only obligation is to pay for it by making the loan to the
client and transferring the funds to the designated accounts.
Q: Is an
Escrow Account needed?
A: An Escrow
Account is not needed for this type of transaction because it is a
"collateral-first" one.
Q: Is this
transaction the same as Venture
Capital?
A: No. A
Venture Capital company usually
requires some sort of control, whether it is in the form of options,
stock, or
some type of security. Quite often the VC will end up with the company
and the
entrepreneur ends up out on the street, even when the company might be
profitable but not as profitable as the VC may want.
Q: How is my
project funded?
A: A bank
approves the project for funding and
the CP shall provide collateral for the client’s project by using a
Standby
Letter of Credit (SBLC)/ Bank Guarantee (BG) as collateral from a "AA"
S&P or better
rated Bank. Against the provided instrument, the bank will write a
one-year term loan to the client in the
amount of either 90% if the face value of the accepted instrument is
US$500 Million or higher, or 94% if the face value
of the accepted instrument is below US$500 Million, and advance
the funds to CP designated bank.
The Provider will then take over the funding of the project by
leveraging this capital to generate funds to pay our investors back and
disburse payments to the project according to the predetermined draw
down schedule as per the agreed upon contract.
Q: Are there
any up-front fees?
A: No.
There is 1% fee (commission) at closing, from the loan
proceeds.
Q: How many
days from "start" to “finish” does it
take to complete the necessary procedures and start to receive
disbursements?
A: The
shortest time frame so far has been
slightly less than 30 days. It mostly depends on the client and banker
relationship, and the time frame your bank will take to return the
required
documentation.
Q: What is
the most important Key Factor to
getting funded with this program?
A: Again,
the client should have a good relationship
with his banker; one that is willing to provide the loan for the amount
the
client is seeking.
Q: Does the
lending bank have any obligation to
the borrower once the lender transfers the funds?
A: No. Once
the lending bank has received the collateral
and the funds have been transferred, the bank has no further
obligation. The
Project Funding Agreement stipulates that client has agreed to appoint
an internationally recognized law/investment firm (such as TD
Waterhouse) that has local presence in the client's country to
administer all Project Funds disbursement, auditing, compliance,
reporting, and once repayment commences, to monitor said payments,
thereby
relieving the bank of any further obligation.
Q: What are
the client’s obligations during the
disbursement period?
A: The
client agrees to account for 100% of
Project expenditures with invoices, contracts, receipts, etc., on a
periodic
basis.
Q: How do I
know this is a real funding group?
A: We are
working with a
prospective client for Project Funding and we have nothing to gain if
the
client does
not get funded. Remember there are no up-front fees whatsoever. We get
paid only after
the client starts receiving their
Project funds. For added assurance, we encourage that the client's
lawyers deal directly and continuously with the provider's lawyers
during the development of the
transaction.
Q: How does
the client know they will be legally
protected ?
A: The
Client will receive the Project Funding Agreement, which is the legally
prepared, controlling and binding Agreement and contains all relevant
conditions and
stipulations.
Q: What is
the minimum required rating for any
bank to be considered for this transaction?
A: If the
client’s bank is not at least “A” rated, then
it must demonstrate its capability to enter into a large transaction or
its correspondent
bank can
be used to receive the SBLC/BG and transfer the funds on its behalf.
Q: How can
the Payment Orders be both
“irrevocable” and “conditional” at the same time?
A: The
Payment Orders are
conditional until the instrument is sent via SWIFT and accepted by the
receiving bank. Once the instrument is accepted, the Payment Orders
become
“irrevocable.”
Q: What
about humanitarian and Government projects?
A: The
procedure is the same for
humanitarian or
a non-profit
projects as the commercial ones.
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