Due Diligence Requirements for DFY Project Funding

To help project developers prepare and easily pass investor CAP DFY Security Due Diligence

Despite what you may have heard, industry “standards” for project finance due diligence largely depend on the lender or investor.  More traditional lenders (such as licensed banks), and when advancing to “Done For You” premium services for In3CAP funding, will evaluate how much “skin in the game” the developer already has — prior cash investment, greatly discounted sweat equity, and/or new money alongside the proposed funding — to take on a meaningful share of the risks.  Why?  It aligns with the perception that there’s “safety in numbers” and statistically decreases the odds of default, improving the risk rating and ways to “cure” or recover from any setbacks.

By contrast, In3 “Do It Yourself” (DIY) security for CAP funding does not bother with any of that.  DIY guarantees from the client’s side unlock 100% funding that would otherwise be out of reach from traditional investors — such as when there’s remaining technology risk, operational or management risk.  Please use DIY due diligence guidelines if you intend to facilitate your own guarantee.  But note that some sponsors will expect lower risk and higher reward than we do, so in practice, due diligence expectations (theirs, not ours) may be somewhere in between DIY and DFY.

In effect, with CAP funding, we trade off partial “completion assurance” for more streamlined and flexible due diligence, where partial Security also guarantees an easier and more predictable process of reaching closing, largely because of more flexible terms & conditions.

Done For You (DFY) services that deliver the required security (SbLC, cash surety deposit, or ground leasing), however, transfer completion risk to a third party.  By shifting this responsibility, developers are asked to mitigate many of the same risks that traditional financiers would require. Per this 1-page checklist, the due diligence standards for In3CAP with third party guarantee may seem comparable to traditional funding, but are actually world’s apart in many respects.  Here are a few of the similarities weighed against the key differences:

• Similarities:  DFY guarantees require going the distance to arrange an insurance wrap, tighter engineering specifications, and evidence of greater developer “skin in the game”, relevant developer team experience, excellent written and verbal communication skills (first impressions are irrevocable), among other aspects.
• Differences:  CAP funding with DFY Security does not need to be shovel-ready, we can pay for permits, land purchase, further EPC or General Contractor fees, technology vetting, geotechnical studies, etc. Even if the project remains at a relatively early stage of development, whatever is required for commercial risk or performance bonding/insurance can be used to determine “how much preparation is enough.”

Why do we need DFY clients to uphold these higher standards?  Because In3 has a reputation to uphold, and IGF’s third party guarantors tend to be highly critical, so please don’t take it personally if we ask you to prove that important risks have been largely mitigated.  In some cases, In3’s advisors can help developers reach or exceed these higher standards.

In addition to Due Diligence on the numbers, the project’s narrative business plan matters, and must come to life quickly, within just a few sentences.  This means writing a simple project description (encapsulating the social/environmental “why” and key facts in one paragraph) to orient and inspire, so it is recommended to put significant effort into storytelling to illustrate impact and make the proposed investment more personal and engaging.

Underwriters start with “why” before caring about “what”.

DIY Security for CAP funding uses relaxed standards for diligence preparation and can be far more forgiving when the proposed project is not entirely shovel ready. But DFY solutions are more stringent.  See comparison between DIY and DFY Security, below:

In addition to the basic CAP funding DIY due diligence, In3’s Done For You (DFY) solutions (products 4-6) will need to meet these more traditional due diligence standards to satisfy the guarantor/sponsor or partner company.  See also Financeability Checklist or use our free Readiness Assessment:

• Solution 4:  Checklist for DFY (also shown above). More on the DFY approach for arranging a guarantor and In3’s more stringent guidelines.  
• Solution 5:  Other “Done-For-You” options, such as Ground Leasing (Ground Leasing explained and coming in 2026).
• Solution 6:  Not sure where to start?  Consider In3’s strategic advisory services for CAP guarantees. Not sure if CAP funding is for you, purchase In3 Management Services to advise on your best options for funding.  We can help you identify and arrange debt only, equity only, tax equity investors, convertible instruments, financial instruments, or hybrids of these with no preset minimums.

Register your project here or contact us to gain a competitive edge with In3’s advisory services. 

Only CAP funding’s Security that you facilitate (Solutions 1-3) is without some initial costs. These DFY solutions comprise the best-in-class offers for project funding. We strive to make private funding accessible and affordable to diverse developers worldwide.

DFY services stepwise approach

Qualification basics for DFY services (bundled into the management fee):

• Industry sector:  almost anything, but we have a preference for renewables, infrastructure, or other sectors that offer social/environmental benefit.  Complete list
• Minimum size: Most are $25 million minimum, non-recourse, with a preference for $100M or more.
• Location & Commercial Standards: 
  • Projects can be located almost anywhere — just not US-restricted countries, presently N. Korea, Russia, Venezuela, or China.
  • The project fundamentals must meet international accounting standards (such as IFRS).  Projects are ready for funding once they are commercially sound (no serious business risks remain) with a well-documented dataroom that includes a US GAAP or IFRS-compliant financial model (in MS Excel) and project business plan.  We can help with that, too
• Stage of Readiness: all DFY solutions require that projects reach very close to shovel-ready status, also called “Ready to Build” (RTB) or upon “Notice to Proceed” (NTP) in some sectors.

Preparing for Bank and Institutional Investor Due Diligence

In3 Group works with project companies to ensure the lowest possible risk premium (added to a loan’s annual base interest rate) and to keep the lowest overall cost of capital as reasonable as possible, while at the same time greatly increasing the odds of success. 

Without CAP funding within reach, which can be because the project does not fit CAP’s requirements, project teams must prepare for a higher level of scrutiny in the following areas

1. Complete “shovel ready” status with significant new cash available so that the project owners take on a meaningful share of the risks. This requirement usually causes developers to seek “alternative” finance (see #9, below).
2. Must be a small or medium-sized enterprise (SME) or individual:  US definition of an SME is a maximum of $400 million in annual revenue, or if an individual, maximum net worth of $100 million.  This is only a requirement for multilateral finance institution support (World Bank Group, US DFC and/or regional development banks), but not an issue for CAP.  See the next point.
3. Working in one of these qualified countries:  Most angels, impact and family office investors are “boutique” in that they’re aligned with or focused on certain geographic regions/countries or sectors.  If working outside the US, ask us about your host country’s eligibility for financing as this list changes periodically.
   Note:  ideally, there would be a guarantee offered as a form of credit enhancement during the life of the loan.  CAP funding’s guarantee is only required during construction, until Commercial Operation Date.  NOTE:  In3 is certified by Moody’s Analytics, originally for the OPIC loan program (now merged with USAID to form DFC; more), and we can, under a management services contract, arrange financing via DFC or more flexible providers in our network, depending on the industry and project’s readiness status.  The challenge with DFC is that they usually take at least 6-9 months to reach closing, and it is fraught with arcane requirements. To qualify, either a U.S. citizen, equity or debt investor/sponsor must own at least 25% of the project, for example; otherwise, there must be other, significant US involvement (more). 
   By contrast, In3 Capital’s sustainable infrastructure and renewables financing nor In3 Completion Assurance Program (CAP) do not have these same US ownership requirements.  We can often reach closing in just 30 days with evidence of a usable Security Deposit.
4. Able to assume a share of the risks:  Without CAP funding, single-source loans are available in most industries and markets for up to 75-90% of the project budget for expansions*, and typically less (65-75%) for new or “greenfield” projects.  This means at least 10-35% of a project’s costs must come fromone or more sources of cash capital (as cash equity, sub-debt, monetized tax credits, grants or in-kind) to obtain the enabling loan, or the lender may ask for a controlling equity interest, which is usually not an option for most of our clients.  By contrast, CAP funding does not require a pledge of equity, but instead uses a Completion Assurance Guarantee during construction as collateral.  More:  what equity/assets qualify?
   (* Formal definition of “expansion” is 3 or more years operating history.  Renovations, retrofits, and refurbishments — such as for energy efficiency — also quality as expansion loans.)
5. Experienced:  Most successful teams have a track record of success for at least 3 years in the relevant field.  How many projects has your team previously completed?  CAP funding is uniquely suited to encompass a wider range of experience, sometimes in collaboration with In3’s personnel, if we can make a difference in this regard.
6. Using proven technology:  Outside of CAP funding, there is no remaining technology risk tolerance – products or services must be well-proven to work reliably for the duration of the funding on a commercial scale.  Innovation is usually in the business model, geographic focus, delivery, packaging, branding or integration, which is also going to cause friction if there’s any risk remaining.  If there are still technology, business model, or commercial risks, be sure to disclose that as part of In3’s initial evaluation. 
7. Focused on positive social, environmental and/or economic benefits:  Projects are usually a source of positive social and/or environmental impact, in addition to making money and creating jobs.  This is often called an “impact investment” or “investing for the triple bottom line” or sustainability.  There are as many ways of building these developmental benefits into business plans as there are companies.  What are your business impacts?
8. In3 can originate the following types of financing under management service agreements:
   • Term loans for at least 3 years (though other structures are available) with loan tenors up to 15-20 years.  Loan grace periods of up to 24 months during construction period.  Most loans are non-recourse or limited recourse and involve a Special Purpose Vehicle, and most lenders do not charge a penalty for early loan repayment.
   • Equity investments for qualified projects — usually for those that are reasonably well prepared to deliver social and/or environmental benefits.  Typical unlevered IRR must be at least 6-10% in sectors like solar, wind, hydro, but more like 12-20% unlevered for biomass; expected IRRs depend on the industry and other factors.
9. Willing and able to receive assistance from In3 (coaching, advisory and investor introduction services):  In3 CAP aside, fees for one-time loan origination, business development and due diligence costs vary from 0.5% – 3% of the loan amount, making this type of non-dilutive financing very competitive in the current economy.  Some lenders offer a risk premium approach for projects that are quite close to bankable.  Use In3’s fast RAIN assessment to see how you stack up.
10. Interested in non-traditional or “alternative” finance (usually not a commercial bank nor via an IPO): If a commercial bank has said “no” or cannot offer reasonable loan terms, and the above conditions are met or within reach, we can still probably help.  CAP funding is preferred, but we have arranged both fixed-interest and variable rate loans, based on SONIA plus a 2.5% fixed “spread”, where the spread does not vary depending on risks or the length of the loan. Normally, mitigating any remaining risks can help to lower interest rates.  Alternative lenders can provide up to 100% debt (“full leverage”) at higher rates of interest, depending on the size of the security deposit and how long the developer is willing to wait for loan approval and funds.

Our job is to help with securing your capital, faster, and at the least cost, as specialists in commercial project finance for nearly 30 years.  Under management services agreements we can also assist with strategy, partnerships, and other tools (such as risk insurance, Completion Assurance guarantees or credit enhancements) to reduce or eliminate the perceived risks in order to help project companies get their financing reliably, quickly and affordably. 

Next Steps

Consider what might be the right sequence of sources to reach your goals.  We can also help sort this out if you wish to consult with In3; just ask for “fundraising / capital formation / investment strategy” services.

Or, if you are clear enough to proceed, use our Onboarding System to apply.

Why we prefer CAP’s innovative pre-qualification process

Both In3 CAP and the above DFY solution offer 100% financing, but none of our funding programs seek control — and our contracts always make terms and conditions transparent, as we have no need or desire for a controlling interest.  This removes complexity and expedites project capital by working with knowledgeable people that will give you straight answers to your questions.

CAP’s advantages, with a Security solution identified, are mainly speed, greater certainty of reaching closing — due to our unique pre-qualification process, offering early yes/no clarity — and greater flexibility in handling the remaining risks and soft costs, from technology risk to execution risk to associated pre-construction risks such as gaining signatures on land lease/purchase agreements, grid interconnection agreements (such as for power generation projects), permits and studies, environmental and consulting engineers reports, … whatever is needed to reach Commercial Operation Date.

Better to stop guessing about what lenders or investors expect, and assure completion funding will be available, a pre-commitment to begin commercial operations, which is where all the hard work pays off.

Next step: download and fill in the appropriate template(s) based on type of Security to the Do-It-Yourself approach, organized by folders here.

* The above is for informational and educational purposes only and is subject to change.  It is not intended for the buying, selling or trading of securities, or the offering of counsel or advice with respect to any such activities. All due diligence is the responsibility of the Buyer and Seller.  This website and any related documents are never to be considered a solicitation for any purpose in any form or content.

More on these options at New Client Resources or Apply now (onboarding) to get started.

We welcome your feedback and suggestions!