Chapter 6

Selling Projects to

Financiers

Financing is an art, not a science. The best way to appreciate the
process is to put yourself in the lender’s shoes. If you were considering
lending someone several million of your hard-earned dollars, what
sort of questions would you ask? How concerned would you be about
certain details of your borrower’s financial history that were unclear?
What weight, if any, would you give to the borrower’s reputation?
Traditionally, lenders evaluate a possible loan from several per-
spectives. These are known as the “C’s of Lending”:

• Capital. Is there capital at risk on the part of the borrower? How
  motivated is the borrower to pay back the loan if its own capital is
  not involved in the transaction?


• Credit/Cash flow. What are the revenues and expenses of the bor-
  rower and/or the project? Are there noticeable trends in past finan-
  cial performance? What are expected trends in the energy industry
  or the industry of the borrower?


• Collateral. What is the security for the loan? If the loan is not paid
  back as scheduled, what items of value remain for the lender to
  own and/or sell? Is it the project equipment or another corporate
  assets, such as stock?


• Conditions. What are the desired terms of the loan?


• Character. How experienced is the management team? What is the
  reputation of the company?

Regardless of lending policies and rules, developing the trust of
your lender will go a long way when you need to secure a loan ap-
proval. Many borrowers approach the lending process as a “torture

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