Construction Funding via Collateral Transfer
At IntaCapital Swiss, we facilitate funding for many construction projects across the globe – ranging from supporting the purchase of materials, equipment, land acquisition to general construction costs. With our expert team of financiers, we are able to offer new projects immediate working capital, subject to passing our due diligence, whether they fall under commercial, residential, infrastructure or leisure.
Typically, companies will obtain bank loans for their projects, and sometimes funding from private equity (PE), Venture Capital (VC) and in some cases, from sovereign wealth funds. However, with increasing restrictions and criteria to be met by banks, companies are seeking funding from elsewhere. Those who have strong business plans could benefit from our financial facility, Collateral Transfer. This facility makes use of Bank Guarantees which are utilised as collateral or security to obtain loans and lines of credit from banks and non-traditional lenders. However, construction companies wishing to benefit themselves from the Collateral Transfer Facility will have to produce a viable business plan with a strong exit strategy.
IntaCapital Swiss SA, Geneva
IntaCapital Swiss are in the unique position of being able to make finance available to those construction companies who have had their project funding applications rejected by banks and other financiers such as venture capital and other private equity funds.
Collateral Transfer is the process where a company, the Provider, lends or leases a Demand Bank Guarantee – usually for a period of one year, to another company, the Beneficiary. For the use of this financial instrument, the Beneficiary will pay the Provider a Collateral Transfer Fee.
Collateral Transfer has been around for many years and has especially come to the fore in the last decade. Collateral Transfer has often been mistakenly referred to as Leased Bank Guarantee – whilst this is technically incorrect, it has become recognised as an everyday saying when referring to Collateral Transfer.
A Demand Bank Guarantee if written correctly is a guarantee that can be effectively turned into cash, by using the asset as a security to obtain loans and lines of credit, often referred to as credit guarantee facilities. This Demand Bank Guarantee will contain specific wording enabling a lender to offer credit facilities knowing they are 100% covered by the security. A Demand Bank Guarantee is governed by ICC Uniform Rules for Demand Guarantees, (URDG), 758 and is payable on first demand.
How does a Construction Company Obtain a Demand Bank Guarantee?
IntaCapital Swiss have a wide network of Providers who can provide Demand Bank Guarantees for Collateral Transfer in return for a Collateral Transfer Fee. The Beneficiary (construction company), and the Provider will sign a contract provided by IntaCapital Swiss referred to as a Collateral Transfer Agreement. Once this agreement has been signed and the Collateral Transfer Fee received, the Provider will instruct their bank to transfer the Demand Bank Guarantee to the beneficiary’s bank, for credit to their account.
Once the Demand Bank Guarantee has safely arrived on the Beneficiary’s account, the construction company can approach their bank, and confidently present their credit facility application, offering the Demand Bank Guarantee as security. The bank should have no qualms about lending against such excellent security.
However, from time to time, some banks decline to lend against a Demand Bank Guarantee for reasons only they will know. In such instances, IntaCapital Swiss has relationships with third-party lenders. Such lenders, lend against Demand Bank Guarantees and will often fill the lending space vacated by the bank.
A bonus for arranging credit facilities through the Collateral Transfer Facility is that these facilities are debt-funded. In other words, the construction companies will lose no equity when agreeing to use a Collateral Transfer Facility to raise capital for their projects.
Construction Projects funded by IntaCapital Swiss and Collateral Transfer
Over the past decade, IntaCapital Swiss has been involved with facilitating the capital required to fund projects worldwide, such as…
- Hotels/Resorts and Hospitality, including shopping complexes
- Residential Properties
- Education Facilities, such as universities
- Sea Ports
- Mining Facilities
- Infrastructure, such as roads, rail, airports and energy plants.
Each project has experienced our first-class management team, who have great experience of the construction industry, following any accepted project finance application all the way through to fruition. To learn more about our case studies, please visit here or get in touch today and one of our advisors will offer tailored advice, suited to your business plan.
Any construction company can apply to IntaCapital Swiss for project finance providing they have an acceptable business plan with a strong strategic exit strategy. If the company passes all the due diligence tests, IntaCapital Swiss will be able to arrange funding for the full cost of the project utilising their highly popular Collateral Transfer Facility.