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Funding

Dont Let a Financeable Asset Go to WasteRachael Maltese

Try going To The convenTional financial

marketsand see whats available in the project nance

arena. Not much, is there? Even i you are lucky enough

to have access to something, is it attractive? Chances are,

unless you are well capitalized already (and thereore

may not need nancing), the debt markets will require

a substantial equity position i not a majority position

by the borrower, and the equity markets will require

controlling ownership o your company.

There is a niche orm o nancing that has been

around or decades but is commonly overlooked

as a source or project nance. It solves many o the

problems aced by new and established companies in

virtually all industries because it is not based on the

strength o the borrower, the underlying assets or the

revenue projections o the project. It is based solely

on the strength o uture revenues, uture capital

commitments, or other monies coming into a company

rom credit worthy companies and municipalities.There are some lenders that consider a companys

most valuable assets to be not their physical assets, but

their relationships with the municipalities and other

investment grade rated companies they do business

with. When access to nancing o this nature is not

ully used, the opportunity to tap into nancing that

1) doesnt require giving up equity, 2) requires little

due diligence and thereore has a very quick timeline

to unding, 3) does not take rst position on assets

and 4) doesnt impose covenants or restrictions on

uses o unds, is wasted. Why is that important? The

ability to use a dierent asset as collateral opens up

doors even to companies with encumbered physical

assets and companies without physical assets.

How Does This Work?Its actually very simple in structure. Lets say a

citys landll is reaching capacity and dumping into

a neighboring municipalitys landll comes at a steepprice. The city is not in the position to build a new

landll or sel-und a recycling and/or waste conversion

solution. Enter a waste-to-energy (WTE) company

with the capability to build and operate an integrated

solid waste management system, but doesnt have the

unds necessary to do so. By entering into the right

agreement with the city, the WTE company can ully

und the project without giving up equity, without

recourse and without having to have strong credit.

Funding can also occur as soon as the contract with

the city is nalized, regardless o permitting or stage

o development. The city solves their waste dilemma

without coming out-o-pocket, without raising bonds,

and without hurting their own credit. All while saving

money on tipping ees, creating jobs and doing theirpart to help their state meet the requirements o their

renewable portolio standard.

The applications are endless. As long as there

is a motivated, credit worthy entity involved in

the transaction, there may be a way to incorporate

this credit-based nancing into your capital stack.

Financing is not only available or new projects, as

previously illustrated, but also or any company with

a contractually obligated uture revenue stream.Take a waste hauler who or years has been

contracted by a county to collect and transport

the countys waste. In order to save money on uel

costs the waste hauling company wants to convert

their feet into hybrid vehicles. Instead o asking

the county to und the technological conversion, or

sel-unding i possible, the waste hauler could use

their contract with the county as collateral or a loan

covering 100 percent o the costs. This would not

only increase the waste haulers bottom line, it mayalso cut down costs to the county.

Is This AccountsReceivable Financing?

No. Accounts receivable nancing is based only

on invoices due. Youve already perormed your

end o the contract and youre looking or money

now instead o waiting 30, 90, 120 days. Accounts

receivable nancing is short term and typicallyrelatively small in denomination. The collateral

here is not invoices due, but uture contracts on

which either party has yet to perorm. Financing

based o o uture revenue streams also has a much

broader and longer scope. Institutional lenders who

There is a niche orm oinancing many small-and medium-sizedcompanies donT realizeThey have access To,w t t t t

t f ktt t . ut wt tt t fw t tt t t t t

.

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participate in this sort o nancing look to place at minimum multi-million

dollar loans or multiple years.

Why Would Anyone Fund My CompanyWithout Taking a Lien on Assets or Equity?

The type o debt nancing most small- and medium-sized businesses are

accustomed to is asset based. The underlying value or these lenders is the assets the

borrowing company and sometimes the general partners o the borrowing company

have. The type o debt nancing most large corporations and municipalities are

accustomed to is unsecured. Using their good aith and credit alone, they can

borrow either publically through the bond market or privately through institutional

lenders at low rates without tying up their assets as collateral.By combining the good aith and credit o these larger companies and

municipalities with the nancing needs o companies they do business with,

these smaller companies can gain access to the unsecured debt market that,

otherwise, is out o reach. The benets o this are substantial. Since the

institutional lender does not want to and cannot take over your company and

assets, that leaves all o the control and fexibility in the hands o the borrower.

Financing is oered at institutional rates and rst position is let available or

other lenders. Thereore, not only can this tool nance a project ully, it can

also replace the equity portion o your capital stack and leave the opportunity

available to apply or equipment nancing.

Why Isnt Everyone Doing This?It does not apply to everyone. Without an investment grade rated entity willing

to enter into a long-term uture commitment with you upront, you dont have

the adequate collateral. Also, access to nancing through local banks is easier and

more evident than access into Wall Street. Because unsecured, institutional lending

does not apply itsel naturally to the small- and medium-sized businesses, it takes

a certain level o expertise in that nancial sphere and an understanding o the

very dierent parameters to acquire this nancing. But with banks tightening their

unding parameters, even companies who have long-term business relationships

with their banks are being denied and alternatives are required.

Bottom LineThis isnt the magic ticket to solve all the nancial problems companies ace

today. Mainly, the two issues just mentionedthe ability to obtain the proper

collateral and access to the right institutional lenderskeep many companies

out o the playing eld. But the attractive nature o the terms and structure o

this nancing makes it a very valuable nancing tool or companies capable o

acquiring it to keep in their toolbox. | WA Rachael Maltese is a managing partner at Greener Earth Financial Solutions, a frm

with access to the capital o several major North American insurance companies and pension

unds. Although Greener Earths scope is industry and location agnostic, they specialize inrenewable energy, energy retroftting, and other sustainable and green processes located in the

Americas and Western Europe. Rachael can be reached at (239) 597-0010, ext. 3, via

e-mail at rachael@greenerearthfnancial.com or visit www.greenerearthfnancial.com.

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2011 Waste Advantage Magazine, All Rights Reserved.Reprinted from Waste Advantage Magazine. Contents cannot be reprinted without permission from the publisher.