Simple Steps to CAP funding

The following streamlined steps assume your project(s) satisfy In3CAP’s four cornerstones — basically, that you seek $25 million or more in funding one or more projects in our focus areas, at any reasonable stage of readiness for funding, based in a country where we work (almost anywhere — In3CAP has global reach).

Better, take a few minutes now to pre-apply (a fast/free assessment called RAIN — Readiness and Investment Navigator), to get your project’s current score. This helps expedite next steps.

CAP funding offers 100% funding with minority equity carried interest at these indicative terms and conditions. See 1-page Tear Sheet (PDF).

START HERE: Take these steps in the sequence shown.

1. Start by quickly assessing if CAP funding is a fit using the RAIN tool, a fast/easy pre-application that registers your project information and gives you a simple numeric score. One of the questions asks about Security: do you have, or can access through your network, non-cash assets to obtain a CAP security deposit? The asset value you need depends on the total funding you are requesting. For non-cash assets, their value is determined by the involved banker when issuing a Standby Letter of Credit (SbLC), so assume ~50-75% of the total required funding to get the best investment terms. To find out more, send the banker this template of SbLC “verbiage,” and have them tell you if the available assets are sufficient for your goal. Some over-leveraged banks in the current market may suggest opening a Line of Credit (LOC) to back the SbLC; although inefficient, this might get the job done, so ask about fees for both the LOC and SbLC.
   If an SbLC is not feasible with your own holdings, do you know someone who, if properly approached and incentivized, would be able to help bring this security deposit? We call this party a sponsor. Ask them to present the value and form of their available assets and the SbLC template to their banker, then skip to Step 3.
   Note: Working in a country with a Sovereign Guarantee (more)?
2. No asset depth? Consider using a cash surety deposit. This option leverages minimum ~25-35% of the total required funding and eliminates the need for a bank-involved guarantee. This is a security deposit held in a separate, custodial account, returned upon delivery of the final drawdown of fund. More on this.
   
   Such cash can come from a bank’s line of credit, a private lender, bridge lender or as a construction loan. It is only a “deposit” (not a down payment) because the funds are returned before the project becomes operational. Debt service can occur from our monthly transfers of invested capital. The party that brings this cash can use the project as collateral — in case of default — along with the added security of our investment agreement. The cost of this loan would be amortized over the life of the project, saving significantly on the total cost of capital. We offer 100% funding so there’s no need for a senior mortgage.
   
   If cash surety seems possible, it is unquestionably the least complicated of all the available options. That may be why it has become the most popular option, applying 3x-4x leverage that then converts to preferred equity in the project’s capital stack.
   All we ask for is an Authorization to Verify (ATV) letter from the banker that can confirm the cash account’s or issuer’s capacity. Download this template then jump to Step 5.
   
   Either a partial bank-involved guarantee (typically 50-75% coverage SbLC) or the 25-35% cash surety deposit option can qualify for 100% CAP funding’s flexible and advantageous terms.  What makes In3CAP funding different?
   
   CHECKPOINT: If neither assets nor cash, then talk with your In3 Affiliate or other advisor(s) about involving a sponsor or lender to show sufficient security for In3CAP funding. Or consider one of these Done For You (DFY) Solutions, products 4-6.
   Otherwise, CAP funding may not be right for you.
   
3. Contact a commercial bank to obtain a Standby Letter of Credit (SbLC) using the assets as collateral. Ideal SbLC face value is 50-75% of the total funding you require. More is fine; a bit less is possible so long as the face value does not dip below ~$18 million, our practical minimum.
   Start with a banker that knows you (private bankers tend to be most familiar with SbLCs used as security for project funding) or a sponsor’s banker.
   • Email the issuing banker In3’s SbLC verbiage template and apply for it to be issued, first as a “specimen” (sample), and later to be delivered via customary SWIFT.
   • Ask the banker to put the SbLC into their bank’s own format (such as on bank letterhead), but request they use the provided template to the maximum extent possible.
   • ACTION: Once received, send the bank’s specimen SbLC document to In3 or your registered Affiliate for approval. Once approved, go on the next step. NOTE: If the verbiage is not accepted, obtain the issuing banker’s version of what would be acceptable, and ask for an accompanying Ready Willing & Able (RWA) letter to formally request any changes.
     
4. Propose a monthly draw schedule based on the SbLC or cash surety deposit coverage. See draw schedule explanation here … the more leverage used, the longer it typically takes to draw down all the funds. To arrange for faster draws, increase either the SbLC coverage or size of the cash surety deposit. Make a proposal based on what you need and we will do our best to work something out.
   Next step: Proceed once either the SbLC or cash surety deposit plus (in either case) a monthly draw schedule has been pre-approved in writing.
   
5. Obtain a filled-out Authorization to Verify (ATV) letter from the cash or collateral account holder, where this person or company is known to the involved banker. The account is usually at that same bank branch, but sometimes banks are willing to use their ledger to confirm an account at a different branch.
   Note: the bank does not need to issue or sign this ATV letter. Just the account holder would, who is simply giving us permission to verify the account’s status, as well as confirm the capacity as sufficient for the type of selected Security. This is our standard process and allows the bank of the counterparty to communicate with us.
   
6. CHECKPOINT: Once we receive a verification reply (via Email) from the involved banker, provide all documents and disclosures for our Due Diligence. If all goes well during Due diligence, the funder issues either a term sheet or enter directly into preparation of the investment agreement with respective legal counsel. Sign and notarize the investment agreement and notify the involved bank.
   ACTION: The issuing bank sends the SbLC (SWIFT MT-799 then MT-760 followed by hardcopy) or cash surety deposit via wire transfer or EFT. This constitutes financial closing.
   • Funds begin monthly transfers per Step 4’s draw schedule into the project’s SPV bank account (unless otherwise arranged).
   • Cash surety deposit is released on final draw or SbLC is allowed to expire following completion — marked by Commercial Operation Date (COD).
   • Project begins operations and generating cash flows.

Be sure to register your project(s) by or before Step 6.
Got questions? Contact your In3 Affiliate or In3 directly.