1. Project Size

• Project must be seeking a minimum of $5mm in financing.

2.  Project Sponsor Profile

• Contact information for Sponsor
• Financial Statement showing $100K in escrow available for financial consulting
• Portfolio identifying similar projects completed
• Financials indicating net worth of Sponsor
• Financial Statement indicating equity level of 30% committed to project

3. Project Financial Projections

• Identification of 3^rd parties involved in funding project addition to Sponsor
• Statements detailing 3^rd party financing commitments
• Projected Cash Flow Statement
• Financial profile of Tenants / Clients of finished project
• Contracts of Tenants / Clients to support cash flow

4. Project Construction Summary

• Construction Costs
• Construction time table

Financial Strength of the project owner / sponsor and credit strength of the tenants or other project clients are the biggest considerations that lenders have when reviewing project financing.

The base drivers for this infusion of technology include government regulations, insurance, and the volume of medical information (etc.). But it goes beyond that; quality health care requires access to, and sharing of information between doctors, nurses, and various institutions. In short technology is required to effectively treat patients.

How Then Does a Modern Healthcare Practice Absorb the Costs of Increased Technology?

Health Care practices share the basic business fundamentals of other businesses. These include; managed costs, maintenance of positive cash flow, delivering profits, and the funding of day to day operations. Not exactly a list of what people sign up for when they enter health related professions. But all are required to fulfill the mission of service that goes with health care as a profession.

Introducing state of the art technology puts significant pressure on the financials of every health care practice. Practices are service businesses that are designed to have the daily operations fund the daily expenses.

A strong health care practice needs to synchronize income with expenses, minimizing borrowing and debt.

Cash Flow is King

To integrate new technology into a practice and to minimize the financial impact on practice financials many administrators opt to lease the systems that will provide the information services to the business and the practitioner. Why lease?

• Leasing is essentially a monthly payment plan. There is not large outlay for a new system thus there is no requirement to take out a loan or access credit lines. The lease payments are often absorbed by increased efficiencies that the new technology delivers.

• Leasing allows administrators to maintain state of the art equipment by “swapping out” older equipment for newer equipment that is often improved and less expensive than the technology that is being replaced.

• Lease payments can be categorized as an operational expense for tax purposes, minimizing their impact on the practice financials.

• Finally, lease financing enables you to retain your practice’s working capital and credit lines. A strong cash and credit position for any business is an asset.

In short lease financing minimizes the financial impact of installing new technology by “folding in” the payments into the cash flow of a health care practice.

Lease Financing is Not Ideal for Every Practice

Each practice has its own financial and operating environment. Financing decisions have to be made in the context of the business as a whole. To help evaluate whether or not your practice is a candidate for lease financing Tara Finance has available a simple worksheet that is available by email request. Simply contact our offices at dmadden@tarafinance.com for a copy.

But what if the public sector is a real source of business for your company, how can you get past the budget cuts and spending freezes? One avenue that may be useful is to include in your proposal the option to finance the project via a Municipal or Public Sector Lease.

How would this help?

A Municipal Lease provides the public agency the option to pay for the project in monthly installments rather than via a large one time full payment. Lease payments are more easily absorbed into tight budgets, and because of the tax exempt nature of public sector agencies, these leases are VERY inexpensive. Sub 5% rates are not uncommon.

Municipal Leasing is not a cure all for doing business in the public sector. Leasing does however help public agencies in getting projects done without breaking the bank.

That said, we still have an obligation to try and move our businesses forward. We have bills, employees, families that depend on us now and plans of our own for the future.

One way to help seed growth from within your business without taking on partners, or seeing a large bank loan, is to try to expand the reach of your current product or service to new market areas or industry niches. But if you are like lots of business owners you have already slimed your business down and are working hard to keep your head above water.

If you need some equipment to fulfill expanded contracts or a new line of customers one way to help pay for this expansion is via lease financing. A lease is essentially a monthly payment plan that would allow the new work to generate the cash required for payments on the new equipment. No bank loan, No raiding your cash reserves.

Finding new markets and new customers is not easy. You still need good credit, (etc.) to lease new equipment. But it is possible to have the new revenue stream pay for the financing for equipment needed to expand your business.

Nothing in business is easy but this may help.

The market is full of technologies that will cut energy expenses, many by a substantial percentage. But the hurdle that stands in the way of energy projects is the upfront investment required. Companies do not want to commit to any project regardless of the ROI if it requires a cash outlay or increased bank debt.

To increase the adoption of energy efficiency technologies developers and contractor are going to have to solve not only their customer’s energy problem but also the cash flow problem. In short there is not only an energy problem there is a finance problem.

What to do?

To increase the ability of businesses to engage in energy projects, project proposals are going to have to include an appropriate financing program that will link the savings generated by the project with the project payment schedule. Some flavor of Lease Financing or a Shared Savings Agreement, that enables the customer to coordinate the monthly payment schedule with the monthly savings will help get beyond the issue of upfront costs.

Such a financing arrangement will go a long way towards helping the commercial and industrial sectors afford energy projects with good ROI’s.

An Energy Savings Agreement enables a property owner to finance the upgrade to their buildings directly out of the savings that the new installation generates. In effect an HVAC or other project that produces substantial energy savings can pay for itself as it generates savings for the property owner. Typically the savings revenue will not only pay for the newly installed equipment; but also generate savings revenue for the property owner.

With an Energy Savings Agreement there is no need to take out a loan, no need to access credit lines, no need to do budget projections. The contract is focused on the savings revenue produced. The payments are expected to come directly from the Energy Savings revenue.

What are the requirements for a property owner to participate in an Energy Savings Agreement?

• Minimum Project Size $1 Million
• Superior Credit Rating for Property Owner
• Service Contract must have a component of equipment
• This program is not for ongoing service maintenance contracts
• A certified Energy Audit with documented projected savings
• Installation  of established technology

Energy intensive projects generate savings revenue immediately. An Energy Savings Agreement takes the “upfront” cost out of the picture and enables property owners to access that savings so that the project pays for itself.

Lenders by nature are risk adverse and we have no shortage of risks.  Contractors with limited experience are a risk. Projects with ROI’s that depend on of REC values to steadily climb are a risk. Projects whose PPAs involve off takers whose credit status is not investment grade are a risk. The list goes on.

That said, how does a developer with a renewable energy project minimize risk and secure the financing needed to bring a project on line? In short; the best approach is to be open to options and to anticipate that the financing structure for a project can evolve if a the lender and developer work together to build a deal that will work for both.

For example: a project’s ROI numbers may work, the PPA may be with a highly rated utility, but the lender has an issue with the experience of the EPC contractor. To move this project forward the developer is going to have add experience to his team.

Another example is with a project that has development costs a lender believes are too high. Something has to give; can the lease rate for the site be lowered? Is the cost for product too high? Is there an alternative available?

The above problems and fixes may seem simple enough, the point is that when seeking financing for your renewable energy project a developer should identify and work with a lender early the project development stage to identify problem areas as they arise. It is not good enough to develop a project and then at the end simply apply for financing with the HOPE the application gets approved.

Identifying and addressing “lender defined risks” should be part of every project’s development, and developers should look to include lenders in developing projects  to build a “finance –able” deal

Energy system upgrades typically begin saving money the moment they are “turned on”.  This savings can generate money to both pay for the new system and often return cash to the municipality.

Besides being a sound green investment, municipalities very often have good to excellent credit ratings that enable them to finance 100% of the energy system upgrade via a “lease to own” program. Lease financing enables the new system to pay for itself out of the energy savings it generates.

Municipalities may not be a simple sale, but their ability to finance these energy and installations make them an attractive prospect.

BY MICHAEL J. CORENThu Jul 7, 2011

This article describes a future that  includes multiple mini nuclear reactors, as small as 300 MW, as part of our new energy mix. Seems as though there are some substantial players involved and orders for the units are coming in.

I’d feel better if I saw more about updated  safety regulations, and cost comparisons with hydro, wind or solar energy. I don’t mean to be a Luddite but this feels like big trouble in small packages.

Worth a look.

A recent study out by Political Economy Research Institute at the University of Massachusetts, Amherst (PERI), details not only that YES going green does produce more jobs per dollar invested then dollars invested in fossil fuel energy. The report also shows that the biggest job producing bang for the investment dollar is in retrofiting existing buildings with weatherization and energy efficiency projects.

Conclusion:  Research shows that investments in green energy do more than move us off polluting fossil fuels, these investments have a positive impact on our economy.

Report summary here