Finance – BCSC Management LLC

Madar Farms

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Gulf Islamic Investments

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UAE in Numbers

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Project Funding Questions

Hubholz — Tue, 22 Dec 2020 10:47:09 +0000

Coming Soon

Seed Funding For A Business

Hubholz — Mon, 21 Dec 2020 20:28:48 +0000

Please note: we do not provide seed funding! This is for educational purpose only.

Today there are many ways to get seed funding for a business. The old traditional way was to go and ask the bank manager for a business loan. As there are problems in the economy and banks are being a lot more frugal with commercial loans, people need to look elsewhere to get the right loan to suit their business requirements.

Nowadays, there are other alternative ways to get seed funding other than relying on mainstream business banking. Companies can now source funding publicly through crowdfunding or privately through investment banks. Structured funding can be done through equity stakes or through debt finance.

How To Apply For Seed Funding

The information above is for those who are looking for seed funding for a small project or business. In order to get seed funding for a large projects there are ways in which this can be done. First is to set up an form your company. Funders need business information to actually lend money to and it looks more professional that this has already been done, if you can build a website to go with it. If you have patents/licensed/agreements this is beneficial and should be submitted to the financiers. Another good idea is if you are a startup leisure resort or real estate project, have an agreement with a hotel chain, let the funders now.

Seed Funders:

Crowd Funding

This is where individuals engage in a world where people are prepared to invest small amounts of money into a thought out idea. These crowdfunding platforms allow the creators to showcase their creativity to enable funding growth through the platform. Usually these businesses are novel ideas and aim to solve important problems.

Crowd funding:

pros:

You are exposed to a large audience to begin with (in the form of investors). These investors use a web platform to discover new business start ups that they would like to invest in. It is a possibility that your business could attract thousands of investors before launching.
Investors in your venture are also fans of your business and will help evangelize your startup adding ‘word of mouth’ marketing as an added benefit.
Through the web based platform, you can expose your business documents. It is a means to communicate to investors where the business is heading.
This is good for start up and early stage investing. By pooling small amounts of capital together, it gives your business the start up capital it needs.
The investors don’t directly involve themselves with the day to day running of the business which gives you the freedom to operate it.
You have the option of seeking help and advice from the community of experts and mentors.
You can decide how much equity you want to give up in your business. How you would like to structure it and then list your proposal for the crowd to see and decide

Cons:

Not suitable if you need large project funding (beyond Simillion) or for projects looking towards expanding in the growth stage through capital injection
Crowdfunding might only canyyou to the next stage where you need to seek another round of funding.
You need to sell your idea and convince more than one investor in order to reach your target funding amount. If you don ‘t raise enough capital, time works against your start up schedule so campaigning and marketing your idea is an important factor to consider.

Joint Venture

You can get Joint Venture seed capital either for a small or large project. The pros and cons are :

pros

Joint venture brings together sets of different skills to achieve a common goal
The business can enter new markets
Some Governments recognise business partnerships
Risks are diversified

Cons

All members are decision makers which might stall progress on business activities
Conflicts of cultural interests
Management styles and structure must be noted
Must have good exit strategy

Angel Investors

As you can see from the graph below, asking angel investors / business angels is quite risky. These types of lenders usually have a seed cap of $1 Million I-JSD therefore if you are looking to raise capital for large project, this is not the source to use. Angels are very wealthy individuals/groups who have made money grafting their own seed business to successful business growth. They are willing to invest in business start ups for two reasons: they understand your situation, and they’re a credible source of contacts and advice. Angel Investors are a great source for businesses looking for seed capital because they are a useful contact and give sound advice which can be more important than the money. With angel investors, we’re now talking about proper venture funding, so it’s time to introduce the concept of “the exit strategy”. Many business founders are often surprised that investors expect them to sell the company or o ublic IPO . The reason wh an el investors do that is that investors want their Capital back.

Angel Investor

Pros

There will not be costs which you would find associated with other forms of funding
Liquidity injected into the project
Investor may bling in added experience and advise

Cons

May have to give up equity share
Investor may wish to be on the board of directors
Many decisions cannot go ahead without the say so of the angel investor

Start Up Business

Finance This is where HubHolzer Financing Broker, LLC can assist you. Project funding is an innovative financing technique that is used for multi million dollar corporate projects. Many buildings, bridges and infrastructure have been carefully engineered using this type of funding model. Project funding has long been used to finance large-scale projects from mining refineries to electric-generating facilities and hydro-electric projects. Increasingly, project funding is emerging as the preferred alternative finance model to conventional methods of financing structures. There are many types of lenders who use different techniques to raise capital as ther is no “one size fits all” loans. The different types of lenders can differ depending on the type of financing you want, whether its debt, equity or hybrid loans. New ways entrepreneurs are looking at having full control of their money is by purchasing their own bank instrument, having it monetized and on a trade platform. These bank instrument have been used for years to fund projects.

Funding a Startup business can be quite challenging, especially if you are looking for amounts larger than $10 Million USD. Given the funding options above, this may not be suitable for your business model. If you want funding for your business, some entrepreneurs think that they can just apply for a full loan and are given a grace period to pay it back. There’s only a few circumstances that we have heard of where lenders have given 100% project finance, (read our case study for a real estate project to understand the lender process). One way a project principal can help themselves is by asking a bank to get a bank loan or some private investors. (We have some Private investors, they are very selective on certain projects.) Considerations to raising capital for a business is as follows:

Are you looking at using your equity for a loan?
How quickly do you need to raise capital?
Have you raised a substantial amount (skin in the game)
Having full control over finances and expenditure

Our website should help inforrn you of the possible business funding solutions for start ups. Nearly all lenders who fund large projects ask project owners to pay towards the fees or some costs. Our funders can provide up to 80% debt funding, the list of funders above could provide you with the extra 20%.

Structured Finance For International Projects

Hubholz — Mon, 21 Dec 2020 20:18:45 +0000

Let’s say a developer needs funding, when they apply for project finance, the lender might put together a structured finance solution to suit the developer’s project requirements. But what does structured finance mean and how do they do it?

What is Structured Finance

The lender will look at the development project to determine what it’s requirements are and then structure a finance model according to the projects needs. If the borrower has been refused funding for whatever reason, this might be the best route to go down. So in other words, structured finance not only benefits the borrower but also protects the funder.

How Lenders Structure Finance To Fund Projects

Structured finance can take on many shapes. The main thing being that a finance model is ‘structured’ in order to fulfill the funding needs of a project. One of the aims of structured finance is to mitigate risk and improve liquidity. Lenders can back projects using bank instruments such as SBLC, Bank Guarantees, Sovereign Notes or they can “pool assets”such as;
Mortgage Loans
Trade Receivables
Intellectual Property
Equipment Leasing

Lenders might offer limited recourse loan to those who want their future cash flow to repay the loan. Structured finance in general will go to market to raise capital and once capital is drawn in from various sources, the funder will then structure the finance together (almost like putting together pieces of a puzzle) and then present it as one lending package to the borrower. This is a great way to fund projects which do not ‘conform’ to day to day banking and their criteria to lend.

Structured Finance Benefits

I-Jsing structured finance is not only flexible but can incorporate many aspects such as collateral, assets, turnover or non of the above if it is an off balance sheet lending model. Another words the structure is designed to fit the borrower’s needs as opposed to the borrower having to fit the lenders requirements. This is ideally suited to those projects who don’t have a lot to show for in the beginning stages however has great potential further down the line. Without this element of flexibility, banks more often than not will turn down requests for funding as they conform to very traditional styles of lending.

Case Study – Resort Development

In order to explain further how a structured funding model may work in the development of a resort, we have provided a case study to assist. The case study centers around a development of a new resort which is in need of funding and have no other properties to leverage against as collateral and security for the funder. Structured funding could be the favorable option to get the project funded. Let us assume that the resort is the first of its kind. It has no collateral and is not at revenue generating stage yet. Structured funding could look at the resort on its own merit such as the management team and the experience they bring with them. The land to be acquired, current and future value and the resort itself and the amenities it will offer.

startup must have “skin in the game”. Rarely does 100% project finance occur. On that basis a funder may go out to market to raise the capital and in some instances acquire external collateral to enhance the balance sheet so as to make the case stronger when presenting the project to capital providers. Or, the funder could acquire ‘capital’ to trigger a of leveraging up the value of a bank instrument multiple times to achieve the required funding target — this method is often used in investment banking models. Once the required capital amount is reached, the funder can then draw-down set payments to the resort as the development rolls out. Any capital not used and is deployed later on can be utilized by the funder to obtain extra interest. Once the development is finished and the resort is up and running, this can then re-capitalized at more favorable rates as by this stage, the resort will complete and generating some revenue and of course there will now be an asset to back the new loan. The new funding model after re-capitalizing can go towards paying out any private equity partners who may have been involved in the equation.

Had the above resort gone down the conventional lending route, the likelihood is that without collateral, existing revenue and a hefty deposit (around 30-40%) the likelihood is that they would have been turned down for this is what the conventional banking route looks for. From their Frspective, the money they lend out needs to be safe and secure and backed by assets.

Financial Statements Information

Hubholz — Mon, 21 Dec 2020 19:56:35 +0000

Fully prepared financial statements can provide funders a lot of information about the company’s current state of affairs. When you start a new business venture, the financial statements can be included with a business plan. Whether your a startup business preparing financial records or a company looking to grow and requires expansion capital, all company financial reports work on the same principles. Companies can use bank instruments to help manage cash flow problems within your organisation as well as using them as a method of trade finance. We have outlined the financial statement format as an example you can use: Income Statements ( profit / loss / revenue / forecast) Statements of Cash Flow (historic and current) Balance Sheets (assets / liabilities) Financial Ratios and/or break even analysis.

Working Costs Businesses keep financial reports to monitor performance for at least 5 years (some countries want 7-10 years for tax recording purposes). Financial reports are for record keeping purposes that are designed to measure and analyze the company’s cash flow, profit and loss on account and includes the balance sheet. Through a well designed financial statement, it’s easy to see a company’s expenditures and outlay and spot room for improvement and growth. Preparing your Financial Statements If you are a start up company it may not be to prove any income, one way to do this is by assumption in net income. Key Financial Indicators can be used as benchmarks that compare your business process and performances metrics to other competitior practices.

Profit and Loss Account

This is known as an income statement which shows the business’s financial performance typically over a 12 month period but are usually broken up into quarterly periods. An income statement should indicate: The profits — gross profits after all expenses paid out The expenses (cost of goods sold, salaries, rent, advertising, etc.) that match the revenues being reported or have expired during the accounting period The revenues (sales, service fees) that were earned as income during the accounting period of operations Forecast (projected profit and loss margins) This particular statement is shown as “net income”, the amount after deductions are made such as tax.

Cash Flow

This is the flow of money coming in and going out of the business. Cash flows record the difference between the opening and closing account balance. There are positive and negative ways in which a company can measure it’s cash flow operations (Examples are outlined in cash flow management) Cash Flow Management

The management of capital flowing in and out of a business is important to it’s survival. If the cash inflow into a business exceeds the outgoing (expenditures) it’s a sign that the business is healthy and strong. 3 ways of monitoring cash flow is through:

Operational Cash Flow —

Sell more goods or services, the company can also increase the selling price Reducing costs in areas such as employment, utility bills and loans Investment or liquid

Finincial Cash Flow —

Cash received through investments or liquid assets

Balance Sheet

A balance sheet is part of the overall financial statement and provides a snapshot of a company at any given date. There are many reasons why you would be asked for the balance sheet. If you are looking for funding, investors will ask to see this document as it reflects the result of all recorded accounting transactions since the business began. Creditors want to see this as it shows whether or not loans can be paid back as it indicates the company’s net worth. It’s always a good idea for companies to examine their assets to determine whether the company has enough current assets to pay its financial obligations. Working out whether you have a strong balance sheet isn’t hard because the two sides of the equation are always in balance. We measure the strength of a balance sheet by taking a closer look at the makeup of the two sides of the equation to find out where it might crack under pressure.

Balance sheets are divided into two main areas; what the business owns (assets) and owes (liabilities). Follow the link to read a balance sheet example. You can break down the balance sheet even further into organized classifications:

How to Prepare a Balance Sheet

Current Assets:

Cash on Deposit
Marketable Securities
Account Receivables
Inventories
Intangible Assets

Current Liabilities: — these are all the company’s debt obligations

Long Term Liabilities
Deferred Revenues
Owners Equity
Costs -Debentures and Tax

Financial Accounting Ratios

A financial ratio or “accounting ratio” is a relative magnitude of two selected numerical values taken from a company’s financial statements. Financial ratios are used to compare a company against an industry average or other companies in order to benchmark or measure a company’s performance. Working Capital

The first way to strengthen your balance sheet is to repay the loan as quickly as possible. Failing to make the repayments could lead to liquidity problems and bankrupcy. There are many lending institutions offering debt refinancing packages. Can you improve on your current loans cureent interest rate? Loan term? Do you prefer a fixed rate? Check your company’s credit rating. Working capital is measured based on the current assets against the current liability. There are three main reasons why a business needs adequate working capital.

Pay staff wages and salaries. Settle debts and therefore avoid legal action by creditors. Benefit from cash discounts offered in return for prompt payment.

Company Assets

Fixed assets are know as tangible assets. Assets are instruments that a company owns or controls so as to benefit from their use in some way. For example, it could be the building that they own or equipment they use to make the company turnover. Current assets such as cash, inventory, accounts receivable and short-term investments are assets that the company plans to use up or convert into cash within one year from the reporting date.

Equity Shares

If the company sees this weak-point in the balance sheet, one way it can grow is by issuing new shares and gets good response from market thus increasing its cash liquidity. A company can add strength to its Balance Sheet in two ways:

By leaving profit in the company (Retained Profit)
By increasing the Share Capital If any, you can outline the stock holders equity interest Capital

Stock Deferred Stock Common Stock Additional Paid in Capital Retained Earnings Foreign Currency Treasury Stock

If any, you can outline the stock holders equity interest:

Capital Stock
Deferred Stock
Common Stock
Additional Paid in Capital
Retained Earnings
ForeignCurrency
Treasury Stock

Financial Statement Tips

1. Many corporations include a ten-year summary in their financial highlights each year. This provides the investing public with information about a decade of performance.

2. Annual report contains financial statements, get a stamp of approval from independent auditors

3. Be realistic with the projected figures

4. Keep an eye on your business loan, can you get a better rate?

5. As savings rates are pretty low, there are many alternative investments that can yield high interest returns

StandBy Letter Of Credit — Purchase Or Lease An SBLC

Hubholz — Mon, 21 Dec 2020 19:30:33 +0000

In today’s financial markets there is misinformation pertaining to Bank Guarantee and Standby Letter of Credit transactions, largely due to the lack of correct information available. In order to keep informed one must go out of their way to learn about the industry and how it operates. The Bank Instrument industry is a world where real information, truthful processes and real bank instrument providers are hard to come by. Here we will try to provide some useful information so that you can educate yourself further on how this industry operates. In this section we will talk about Standby Letters of Credit.

What Is A StandBy Letter Of Credit? Letters of Credit (LC) can be classified as either documentary Letters of Credit or Stand By Letters of Credit (SBLC/SLOC). A Documentary Letter of Credit allows payment to the seller. It facilitates the movement of goods in an international transaction. In trade finance, Letters of Credit is one method of payment used to reduce risk in global transactions between a Buyer and Seller of goods. They are mainly used for commodity and industrial use as performance bonds. A Standby Letter of Credit is an agreement, not intended to be drawn upon but is a safeguard in the event of non payment by either party mentioned in the contract. You can either lease or purchase a Standby Letter of Credit. In other words; an SBLC is a document issued by the bank guaranteeing payment on behalf of their client. The bank confirms the collateral is held within their clients account, the client buys an instrument and it is then freshly cut backed by Providers capital. De possible to Monetize an SBLC.

Finance A Business Using An SBLC Standby Letters Of Credit can be used to finance a business; particularly those looking to grow or expand. Having a SBLC monetized is the best and quickest way for a business to get some much needed cash. Bank instruments can be monetised and used to enter into trade platforms. SBLC’s could be one of the best alternative ways to finance a business. Reason being is that you are not dependent on a lender per se. It is likely that the funds will arrive in tranches and this could be a perfect way to manage your capital.

What Parts Do Banks Play In SBLC Transactions? Technically speaking, “Banks DON’T issue Standby Letters of Credit” Instead, the bank is the deliverer not the initiator of the transaction, they CONFIRM their client has the sufficient funds. For example; let’s pretend you use a courier to deliver a parcel to a customer. You are the Provider of the parcel and the courier is the delivery agent who delivers your parcel to the Receiver. The courier isn’t the Provider of the parcel, they are just the delivery agent whom the Provider uses to send the parcel from the Providers location to the Receivers location. using the above example, banks operate exactly the same way when handling Standby Letters of Credit. The bank acts as the courier and they receive a financial instruction from a Provider to deliver one of the Providers assets (Bank Guarantee — BG or SBLC) to the Receiver’s bank. In other words, the banks are in place of the courier, being that they are the Sender and Receiver of SWIFT message (Whether it be MT760, MT799..etc..)

Genuine SBLC Providers

As discussed at the beginning, genuine SBLC Providers can be hard to come by. The banks don’t advertise SBLC’s as their own bank products, simply because they are not allowed to. Standby Letters of Credit are provided by high net worth clients with large cash holdings in an account at the Bank. High net worth clients are usually hedge funds, private equity, pension funds, and large coprations etc.. It is very difficult not only to get in touch with bank instrument Providers, they are very strict too, they don’t mess around. Genuine Providers perform many checks and balances which means that any authorised mandate agents connected to Providers are too follow strict procedures. This is good new on our part as we know we carry clean business but it means that any business we introduce needs to be able to follow certain procedures. Because of the strict ruling, HubHolzer will let you know what is required but in general we will ask for POF and BCL to say you can pay for 10% of the LTV/face value of the bank instrument. We want to know that every business that passes us has the capability to afford the lease fee.

How Do SBLC’s Work?

When a company completes the forms to lease an SBLC, what they are essentially doing is borrowing collateral (what this is actually called is a temporary “CTA” Collateral Transfer Agreement). Let’s say that you are an oil refinery company looking to buy oil and are dealing with say ABC Oil. You have an agreement with ABC Oil saying that you want to buy $100M USD worth of oil (on your books you have $103 1-JSD) . You may choose not to use your own bank account and apply through your own bank but instead, prefer to lease a StandBy Letter Of Credit from a different Provider. There are several ways SBLC’s can be used and it is all in the wording of the MT760. Providers can issue Standby Letters Of Credit for the purposes of:

Trade and commerce — (for purchasing of goods).
They can also be used to back credit lines issued by banks.
And/or project funding.

As well, there are Providers who can issue cash backed SBLC’s which are monetizable. However we will need to know who the monetiser is in order to assign the SBLC in favour of the Monetizer.

SBLC Document Application and Requirements

When leasing a bank instrument, the DOA is a legal agreement signed by both Parties. It states that the titled owner will lease the SBLC for one year and one day at $100M USD giving it back with no liens or encumbrance. The legal documents is called a Deed of Agreement (DOA). Both banks will also send a Ready Willing and Able (RWA) message to each other. The Providers bank confirms it’s ready to issue the SBLC and Receivers bank confirrns their client has the funds. After the DOA and RWA are signed and SWIFT fees are paid, the banks of both parties will message each other until the instrument is transmitted to the Receiver. In some agreements should one fail to meet the timeline, there will be a penalty and risk of no further business. Two things to take note: 1) There is no standard leasing process, leasing programs differ and each determined by the Provider. 2) The Provider instructs the bank what to do therefore if you choose to go through a ba lots of paperwork as they have policies and guidelines to ahere to.

Lease An SBLC

You can apply to lease an SBLC in one of two ways. One way is to apply for a StandBy Letter Of Credit with your bank or; use authorized agents such as ourselves and fill in a DOA (deed of Agreement). Some terms and timelines may be negotiated (there may be an element of flexibility through some Providers). We stress that buyers should clearly understand the documents before signing them. Double check your details, be clear and correct as it can be a very costly mistake. The Providers bank will send a Ready, Willing and Able Letter on behalf of of their client. It’ll say something like ” Our client on behalf of [bank] is RWA”…. the receiving bank also sends a RWA on behalf of the Receiver. The SWIFT fees are then called upon and the SWIFT messages are exchanged bank to bank until SBLC is issued. A hard copy of the SBLC will be sent to the Beneficiary.

SBLC Funding Process

The image below is an example of the process of acquiring the bank instruments for a Standby Letter of Credit. When the banks have completed their messaging, you may receive a hard copy of the SBLC/MT760. Just bear in mind whether its for commerce purposes or if you can have the SBLC monetized. This is the part many people often get confused.

Fresh Cut SBLC

Fresh Cut only means that it has been freshly issued, “seasoned instrument” means that it was issued in the past and is in the secondary market. People buy fresh cut bank instruments as the bank instrument comes from a direct credible source thus knowing exactly the person/organisation who cut the instrument for lease. Usually bank instruments such as SBLC’s are time limited and should be paid back in full to the Provider within the time specified.

Monetizing An SBLC

After leasing an SBLC, you may want to monetise it. All that happens when you monetize an SBLC is the instrument is converted into legal tender. This can take up to IS days to process and verify. Your bank should be able to do this for you. It wont be monetised for the full amount as it can vary on a number of factors such as; bank rating, country of issuance, LTV etc.. The instruments must be in your name and there is a time limit on a leased SBLC’s. These bank instruments can only be leased for one year and one day. Bank instruments are checked for forgery and there are strict guidelines to adhere to. Heavy due diligence will be undertaken. Banks that issue fresh cut bank instruments must be UCP-600 compliant and be a top banking institution.

Purchasing A Standby Letter Of Credit

Purchasing an SBLC, it is similar to the process of leasing a StandBy Letter Of Credit. The main difference is that you own the instrument in your company [name. For example: The Provider iS the asset owner, asset holder and asset controller. If you choose to purchase the SBLC, the title of goods will be transferred to you. Purchasing an SBLC is advantageous in that you can then choose to lease the instrument out if you so choose to do so. Ask us about our low cost SBLC’s that can be put into a managed trade platform.

SBLC Project Financing V’s Conventional Funding

Conventional funding can take a long period of time from submission to receiving funds for a project. The reasons can include;

A lengthy due diligence procedure and/or
Whether or not the funder has an appetite
Other projects in the pipeline thus having to wait a few months.

Financing projects with an SBLC can be a cheaper and faster route as the procedure takes a few weeks and is less onerous. Leasing a bank instrument can be also a cheaper as some investment banks charge thousand of dollars to fund a project. Please note; it is our requirement that we ask you to provide Proof of Funds and/or a bank comfort letter. This is to demonstrate to the Provider that the companies we represent are in good faith and in trust to pay leas fees.

Swift Fees

When people apply for an Standby Letter of Credit most do not understand how the mechanism behind the transaction works. There are certain buyers who think that there are no fees involved when issuing a bank instrument and presume the SWIFT messaging service is free. This is not the case. The banks of both parties communicate as per the DOA agreement using SWIFT messages, recognizable to us as MT messages. Please check on the search engines for (Link to another website with typical SWIFT Fees SWIFT charges). Sending a SWIFT message isn’t cheap, these are banks charges! We suggest that if you need an SBLC, prepare at least 12% of the asking amount to go towards the cost of an SBLC. One way in which the buyer might not have to pay SWIFT Fees is by having the bank issue a Bank Comfort Letter (BCL). This letter just sates that the Buyer has the funds. This needs to be arranged before the DOA is signed.

Other Fees:

Depending on the Provider we generate our fee from the cost of the instrument. You may notice a purchase/lease price plus a commission price eg (10+2). The commissions are paid for any intermediaries/brokers. We keep our commissions low to Provide you with a fair deal. Need A Large Bank Instrument?

If you need a Stand By Letter Of Credit for a substantial amount (ie in the Billions in tranches), we can arrange this for you on a case by case basis.

Information About SBLC Procedures

Please note that it is NOT advisable to change the SBLC Procedure writte are not in a position to dictate to our Providers how to operate their Proc able to give you a few choices on different Providers. Changing procedur frowned upon as it makes the validity of the SBLC enquiry questionable. We have partnered with a firm to provide trade and commerce letters of forward transactions. please let us know your requirements on the conta

How To Apply For A Bank Instrument

You can apply to have an Standby Letter Of Credit either through a bank services. We can give you a number of low cost options to help fund you team has streamlined the process the paper work saving time and heade you through the process from start to finish.