Selling Projects to Financiers 101Once you have submitted this information to a lender, it’s your
turn to start asking for information. Here are some important questions
to ask a lender:
- Are you interested in a lease on the equipment, a loan to my com-
pany, or a loan to the ESCO? - Is construction financing being offered as well as a long-term loan?
What factors will affect the rate and terms of the loan? - How soon can you send me a proposal to finance the project?
- What is the timeline for loan approval, due diligence, and funding?
- How often does the loan committee meet? Can I make a presenta-
tion to them? - Do you require the ESCO to have a construction bond?
- What will be your course of action if the project fails to generate
the expected savings? - Is there a prepayment penalty on the loan? If so, under what condi-
tions? - What happens if utility rates go down and the dollar amount of
savings is insufficient to pay for the loan? - Can payments be made quarterly or annually instead of monthly?
Lastly, and most importantly, remember these words of wisdom:
Everything is negotiable. Don’t be afraid to ask for a lower rate or bet-
ter terms than initially offered by a lender. As long as you have clearly
demonstrated to the loan committee that your project is well-planned
and has a high likelihood of success, you will be surprised at how flex-
ible lenders can be.
THE FINANCIAL ANALYSIS OF A PROJECTWhen lenders are making a loan based on the full faith and credit
of a company, they tend to focus on the financial statements and general
business performance of the proposed borrower. With project financing,
however, it is the project itself which receives much attention. Even