CREDIT ENHANCEMENT & COLLATERAL LENDING

The financial solution will have advantageous cash flow and tax structure for the borrower. Please contact our office for more details and a proposal. Contact us today.

This is a fixed rate Financing with primary applications for expansion and leveraged buy-out situations. There absolutely no up-front fees. Depositor provides all funds required for the transactions, structuring and applicable documentation. The minimum amount considered under this program is $10,000,000.00 Transactions substantially larger can be arranged. The borrower must have a strong cash flow to pay the debt service on an interest only note for 10 years or have a guarantor to insure the debt service. Companies desiring to expand and do not want to give up equity in their company find it ideal. The program has been operating in the U.S. for over 20 years.

Successful implementation of the program requires three parties: The Borrower, a Commercial Lender, and the Depositor. The Borrower must have a current positive cash flow and be able to demonstrate the ability to effectively employ the funds provided to generate adequate cash flow to service the debt or have a Guarantor to insure the debt service. Projects that do not have immediate cash flow can be considered with a strong borrower and a clear path to cash flow.

The Depositor provides funds to purchase a 10-year CD to the Commercial Lender resulting in the Borrower obtaining fixed rate funding over a 10 year term without giving up equity, and in addition, Borrower realizes certain tax benefits. The CD guarantees the principal of the loan so the Borrower does not have to pledge assets to secure the loan. The Borrower may be required to pledge sources of cash flow to guarantee the payments on an interest only loan. All funding is on a ten year basis.

A Simplification of the Steps is as follows

The Borrower signs an agreement for fees with the transaction. to be paid at closing. The fees are based on the amount of the CD. Fees range from 7% to 9% and are based on the total amount of the CD. The fees are required to be paid at time of closing by the Borrower from the proceeds of the loan.

The Business is reviewed by Commercial Lender for its ability to secure and service the interest payment. The Commercial Lender must first approve the loan to the Borrower, subject only upon the Depositor and funds being approved, before meeting the Depositor and beginning negotiations. Depositor is scheduled to meet with the Individual at the Commercial Lender who is qualified to make the decision on the interest rate for the CD and accept the proposed deposit and handle the interest strip. Depositor cannot meet with anyone else regarding the loan and deposit except the legal counsel for the Commercial Lender who must be present. This is a limitation imposed upon the Depositor by Federal Law. The Depositor will verify with the U.S. Treasury that the person he is meeting with has the authority to represent the Commercial Lender in this capacity. The meeting happens and the Commercial Lender takes what ever time is needed to review the financial information of the Depositor and documents provided. The Commercial Lender calls for a closing on the loan and for the deposit and we close.

Once the Commercial Lender has decided to make the loan, subject to approval of Depositor and Funds, the Depositor will contact the Commercial Lender giving them full information on the Depositors credentials and any other information the Commercial Lender may require. The Commercial Lender will understand that there are certain privacy and non-disclosure considerations for the Depositor which may only be discussed with the Chief Financial Officer, Legal Counsel or President of the Commercial Lender.

An Illustration of the Process is as follows

• Borrower meets with their Bank or Lending Institute and arranges for a loan. This should be a firm commitment by the Commercial Lender to execute the loan to the Borrower subject to the Depositor funds being approved to purchase the CD on the amount of the loan to guarantee the principal of the loan. The Borrower must satisfy or guarantee to the Commercial Lender the payments on the interest only loan for 10 years.
• Borrower contacts The Management Company. and advises that the Commercial Lender is ready to execute the loan subject to the approval of the Depositor and the purchase of the CD. The Management Company will place in motion the necessary contacts to be made between the Commercial Lender and the Depositor to begin negotiations of the CD purchase. The Depositor will provide the Commercial Lender with all necessary financial and background information to satisfy the Commercial Lender’s necessary due diligence on the Depositor.
• Once the Commercial Lender approves of the Depositor and his funds, the Depositor will meet the President and General Counsel of the Commercial Lender to negotiate the interest rate on the CD and the interest strip of the CD.
• The Commercial Lender will call for a closing. At close the Depositor will purchase the CD from the Commercial Lender and the Commercial Lender will execute a loan to the Borrower in the amount of the CD. The Borrower will purchase the CD from the Depositor for 50% of the loan amount, then assign the CD to the Commercial Lender to guarantee the principal of the loan.
• The Depositor leaves the close with the proceeds of the sale (50% of the loan amount) of the CD to the Borrower and strips the interest from the CD.
• The Borrower has an Interest only loan for ten years for the full amount of the CD and full access of the balance of the loan or 50% of the loan amount. The Borrower has not given up any equity in the Company.

Impact of the Transaction
First: The total emphasis on the loan by the Commercial Lender has been focused on the Borrowers cash flow and resources or Guarantor. Are they adequate to service the interest only payments on the loan? The Commercial Lender is fully secured by the CD principal and the CD principal is the source certain for the repayment of the loan principal.

Second: In as much as the Borrower’s assets (both current and acquired through the employment of usable funds) are not required to collateralize the loan principal. The Borrower can provide the Commercial Lender with liens on the said assets. This enables the Commercial Lender to have tangible collateral coverage on its interest. The resulting quality of the credit for the Commercial Lender will often be superior to the majority of its existing loan portfolio.

Third: Borrower has immediate, useable funds, which may be employed in its business. This is accomplished without equity dilution and affords the Borrower essentially full control of the funds, as may be agreed with the Commercial Lender.

Fourth: Borrower has an apparent high amount of interest payable over the term of the loan with the Commercial Lender: however, (a) all Borrower payments are structured to be tax deductible as interest, (b) Borrower’s cash flow requirement is approximately the same (or less than) would be required to service a traditional loan amortization program. The periodic payments of interest and actual cash paid by Borrower in this program can be substantially less than the standard amortized loan because at 50% tax bracket, two dollars must be earned for every one dollar available to amortize principal.

An example is we would do a $50,000,000.00 deposit for a CD and the Commercial Lender would be loaning $50,000,000.00. Both are a ten year term. The Borrower would purchase the CD for $25,000,000.00 from the Depositor and pledge the CD to the Commercial Lender to guarantee the principal of the loan. Depositor strips the interest from the CD to recover the 50% of funds disbursed at closing which did not go to the Depositor. The project would have approximately $25,000,000.00 for their business purposes and the interest only obligation on the $50,000,000.00 loan.

Contact our office today to begin the qualification process:

National Business Services
702-405-9075

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