Financing of Projects
Generally, external financing is necessary for most biomass projects, as very few investors can finance a project 100%. The first step to secure financing is to prepare a good business case including realistic budgets and cash-flow forecasts etc. It is important to include all items including operating capital, where financing of inventories of raw-material and finished products is often forgotten.
As we are used to evaluating biomass projects we offer our help in evaluating your projects.Danish Export Insurance System - EKF
Generally, we recommend investors to obtain their financing locally, but an opportunity might exist using the Danish Export Insurance System – EKF.
EKF offers a flexible system for financing Danish exports. Due to the on-going financial crisis, this type of financing can be offered to customers in most countries in the world.
In order to be considered, your company should have a good equity and show profitability during the past 2 years. There is no need to apply for this type of financing if the company is a newly established company, or does not fulfil the requirements for profitability. Large projects will be subject to more thorough scrutiny.
You will find more information about EKF by clicking on the EKF logo to the right and you will find more information about EKF’s requirements for evaluating projects:
1. Financing based on past performance.
This type of financing is the most used and any financing will be based on historical data. This type of financing can be obtained in two ways:
1a. Contracts up to EUR 650-700.000
These contracts can be approved by our bank provided that the customer can fulfil the following:
- The company shall have been in operation for a minimum of 2 years and there shall be official records about the company
- The company cannot have a record of delayed payments(delays for more than 30 days during the last 12 months)
- The exporter (us) and the buyer cannot have a financial relation.
Financial information should be available, and this information should not be more than 3 months old and should include information for at least 2 years.
- The report cannot have negative comments about credits to the company
- The company should have equity (share capital plus reserves and retained earnings) of 3 times the loan amount.
- The company should be classified in the best categories by the financial credit information institutions as follows – D&B in 1 and 2 out of 4 categories – Experian minimum 50 out of 100 – Creditreform minimum 100-339 out of 600
If all this is acceptable our bank will get 100% insurance from for the loan amount from EKF, and they will then offer the financing to the customer or the customers bank
1b. Contracts above EUR 700.000
These contracts are generally handled in the same way as 1a. but the financing is not automatically given, and the time involved is longer.
2. Project financing
This type of financing is normally based on future performance, as the companies are new or not yet established. The projects are normally larger – in our case above EUR 1 million or considerably higher. The projects often involves more partners with complicated financing schemes and contracts and in order to obtain the funds a high amount of documentation has to be provided involving but not limited to the following:
- Feasibility study of the project including business plan, organizational set-up etc.
- Financing plan for the project – including commitment from sources
- Profit and Loss Statement and Balance Sheet development for 5-10 years
- Cash flow calculations for 5-10 years
- Raw material contracts with suppliers for 5-10 years or longer.
- EKF wants proof of raw material availability and price formula
- Sales contracts for briquettes for 5-10 years or longer.
- EKF wants proof that the final product can be sold
- Copies of all necessary permits and documentation necessary to start operations of the plant