How to raise funding despite a low credit rating?

About credit rating

Credit rating is a measure that most financial institutions use to decide if a prospective borrower can or cannot take out a loan. The way they calculate the rate tends to be rather opaque and varies from one entity to another, depending on their risk appetite and level of sophistication.

 

Ranking del riesgo crediticio

We will not delve here into their secret recipe but focus on a way to convince them to unlock funding to low credit rated applicants.

But before all, let me ask you:

  • Do you have a project, that is viable but requires a capital investment between €5 and €100 million to become reality?
  • Do your current creditors believe that the project is sound but tell you that your company and/or the project do(es) not meet all their lending criteria?
  • Have you already exhausted most of the traditional ways of fundraising: factoring, confirming, project finance and private asset-backed mortgages?

If you have exhausted the traditional ways of funding, then you may be interested in talking to us and meet up with a Guarantor to enhance your credit.

If the guarantees that you can offer and not enough to convince the Lender(s), then you should think about contacting us to receive Guarantor‘ terms.

The following graph summarises the process:

The concept is simple. The borrower reaches an agreement with the Guarantor, who brings additional guarantees to improve the credit worthiness and enable the issuance of the loan.

  • The benefit to the Borrower is to secure the credit loan
  • The benefit to the Lender is to reduce his risk by pledging the Guarantor’s collaterals
  • The benefit to the Guarantor is to optimise the return on his assets

What is our solution?

VC-A has reached an agreement with a US Holding to enhance credits. Our partner as got more than $1.2 billion of assets under management.

Investment criteria

Borrowers are companies that need to fulfil the following conditions:

  • The company must have been operating for at least 2 years
  • They must have invested at least $10 million into the business
  • They must face difficulties to raise funding
  • Their business model is transactional
  • They need a credit between €5 million and €100 million
  • Funding must increase substantially the value of the company
  • The company must have already identified a Lender willing to issue a loan subject to the execution of a secondary guaranty.
Preferred sectors

We shall favour the following sectors:

  • Energy
  • Telecommunication
  • Production
  • Media
  • Agriculture
  • Naval
  • Leasing of equipment
  • Logistic
  • Finance
  • Real Estate (development, not pure brokering)
  • Commodity trading
Preferred locations

We prefer to look at operations in the following regions:

  • Spain
  • France
  • United Kingdom
  • United States
  • Western Europe
  • Asia

Samples of projects

1- Company in a special situation (“zombie” company)

The company is operating normally but carries a huge bulk of debt accrued during the downturn of the economy and then restructured as very-low-interest-rate long-term debt by banks unwilling to show write-offs on their books. A so-called “zombie” company.

They have identified a very high return project but cannot get a short-medium term loan because of their high indebtedness.

2-Commodity trader

The Trader has got an opportunity to triple his turnover but traditional lenders do not want to fund him because they consider that his current balance sheet is too small compared to his trading volume objective.

3-Highly leveraged company with syndicated loans from traditional banks

The company is heavily leveraged with bank loans. In spite of having new viable projects, it cannot raise more debt because bankers do not want more exposure on that client.

4- Investments in projects that will impact the company valuation

Capital-intensive projects in need of capital to enter a new market.

e.g. Building a new manufacturing plan, new infrastructures (energy, telecom…), acquisition of units of productions to generate additional cash flow (ships, aircraft, hotels…) etc.

 

For the Spanish version, click here.

You may also be intereted in our article on "Leveraged Recapitalization".

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