Pre-Qualifying a commercial prospect for financing

If you are proposing a building retrofit, you naturally prefer your customers to be ready with cash, or to make their own funding arrangements ahead of time so you can focus on what you do.

But the reality is that in a mature marketplace, financing is part of the sales process and applies to at least 50% of the prospect base. While CleanFi will instantly provide you with different financing scenarios, a few inquiries will steer you to the best solution , accelerate the sales cycle, and possibly save a lot of wasted time for both you and the client in a project that may not pan out.

To set the most basic financing strategy for your client, you’ll want to get two important over-arching data points: real estate equity and profitability, or: what is the client’s greatest strength: profitability and credit strength, or real estate equity.

Getting ahead of it!

By integrating general financing-related inquiries into the consultative sales process, you are more likely to be seen by the prospect as a solution-oriented thinker. Here are 3 simple lines of dialog to qualify the funding strategy:

1-Optimize the power of CleanFi by getting two basic pieces of information:

For any given project profile, CleanFi returns funders that looking specifically for the answer you are providing. Inversely, providing wrong basic profile info may mean that you might not see a great solution for your project. So…find out:

Specifically what type of entity will be applying for financing? (A “single member LLC” (one owner), a partnership, a c-corp with mid-sized revenue ($>40MM), a franchise owner vs. a corporate owned entity…?)
What type of property is being improved (“asset class”: hotel, multi-family, industrial…)?

2- Gather topline information that will allow you and your CleanFi advisor to select the optimal financing mechanism and product to present your client.

Once you have your CleanFi-generated options and proposals in-hand, you’ll want to steer the client toward the one best suited for them, and prepare the client for the underwriting. Remember that the CleanFi team is always available to help with these questions, and to put them into context for you and the client:

3 questions about the company:

How long has the company been operating?
Has it been “reporting a profit or a loss” over each of the past 3 years?
Do it have tax returns for the last 3 years, or CPA-prepared financials ?

3 questions about their property:

Is the property owned in the name of this organization?
How long have they owned it?
How much “free equity $ value” ($ value outside of what they owe on their mortgage) do they estimate there is on the property?

Answers to these questions may not be what you expect, and will inform which mechanism will or will not apply; for example: “We don’t own this property”…Good to know! In that case, will the improvement lifetime exceed the remaining time on their lease? Does the owner approve these improvements?

Answers will also determine how ready the prospect is to apply for financing (“Our non-profit doesn’t have cpa-prepared financials”), and whether we should steer them to a credit or real estate based solution, or whether we can anticipate that a personal guarantee will be needed (see “How Different Financing Mechanisms Secure Their Risk” for more details).

Sometimes, a conversation between your prospect and CleanFi can avoid a negative outcome by encouraging the prospect to get their documents more ready for the underwriting process before they apply.

3- And, for improvements with tax credits (ITC)…

If your improvement has government tax credits, or accelerated depreciation, ask the client directly and early if they can absorb them in the year of the installation.

If not, can they apply them to earnings from any of the last three years?

A ”no” on both those questions immediately indicates that the cashflow model may be in trouble if you are integrating the ITC(+adders) into it. A “third-party owned” financing solution may be best, like a PPA or Energy as a Service (EaaS).

If so, prepare your client for that “good news!” option, then turn to CleanFi’s BidDesk, where you upload your project files to receive investor proposals for that specific project (subject to underwriting the client). Note that many investors require a statement from the off-taker (the client) asking for bids, validating the conversation between the contractor and the prospect to be sufficiently advanced to warrant the investor’s time and consideration. Interested investors will then return project bids, and invite the client to submit a full financing package for underwriting.

A consultative approach is a sympathetic approach, and good business!

From the moment you hear that financing is a possibility, put the client at ease with the statement:
“There are financing options and strategies for almost every corporate credit profile. Let’s find the right one for you.”

That will put the customer in a willing position to provide the information you need for the project to succeed.

CleanFi is designed for the multitude of corporate profiles and circumstances you will come across. With the right information from the client, we can steer the project to a successful financing solution, or help prepare it for that objective.

Don’t want to do this? Put your prospective client in touch with us and we will do this for you!

support@cleanfi.com or 877.301.7800

CleanFi