Pre-qualifying with a Standby Letter of Credit (SbLC)
Key Steps for In3 Capital Project Funding (CAP Security)
Understanding SbLC Pre-Qualification
What is an SbLC for CAP Funding?
A Standby Letter of Credit (SbLC) is a bank-issued guarantee. For In3’s Completion Assurance Program (CAP), it serves as security to help developers and sponsors finance their mid-market projects.
Face Value: Ideally, the SbLC should have a face value of 50-75% of the total required funding, but must not be less than ~$17.5 million, offering a balanced method to secure complete project financing.
Crucial First Step: Project Fit
Before proceeding with these pre-qualification steps, it’s essential to ensure your project aligns with In3 Capital’s “Sweet Spot” criteria.
➡️ Action: Contact In3 with your project basics using the online registration to confirm suitability.
(Note: Protocols for other bank guarantees are similar; cash surety deposits differ significantly.)
Pre-Qualification: Inception to Due Diligence
Standby LC Wording
The initial step focuses on ensuring the language of the SbLC aligns with project funding requirements.
Action:
- Developer or guarantor Downloads In3’s SbLC template.
- Asks their issuing bank to prepare and Send via Email a complete “specimen” (unsigned draft) of the SbLC to In3 for underwriting review.
Purpose:
To confirm the SbLC wording is appropriate for mid-market project funding through In3.
Result:
The guarantee instrument wording is agreed upon between the issuing bank and In3’s funding bank. The signed instrument (hardcopy via SWIFT) is only sent much later, after all agreements are formally entered.
Bank’s Letter of Intent (RWA)
This step demonstrates the issuing bank’s intention to provide the SbLC.
Action:
- Developer or Guarantor uses In3’s template to obtain a Ready, Willing & Able (RWA) Letter from their issuing bank.
Purpose:
The RWA letter formally shows the issuing bank’s intent to follow through and deliver the SbLC once the project’s funding is under contract with In3. Know more about RWA letters.
Result:
Send RWA Letter to In3 via email. Once In3 receives and approves it, you can advance to the final pre-qualification step.
Banker Authentication (ATV)
The final pre-qualification step involves verifying the bank’s commitment and preparing for due diligence.
Action:
- The party that owns the bank account used to issue the SbLC downloads, completes and Sends via Email an Authorization to Verify (ATV) letter to In3.
Result & Next Steps:
Upon In3’s receipt of the ATV and confirmation via email from the involved banker:
The Developer provides the complete project package to In3. This includes:
- Detailed financial projections (in Excel)
- Draw schedule
- Uses of funds statement
- Other supporting information
- This submission officially launches the due diligence process.
- If all goes well during due diligence, the next major milestone is to arrange either a term sheet or the definitive investment agreement.