One of the undoubted vantage of Alternative Finance is that your finance plan will not pass under the Underwriter risk-assessment.
Alternative Finance is a process which does not need to comply with an ‘Underwriting’ process through which individuals professional or your Bank Officer asses which is the financial risk of your plans. How many good/profitable projects or finance plans are stopped by not correct evaluations by risk-taker? But with the Traditional Finance approach, your finance plans will be supported or not only according the Underwriter’s opinion, also if it is wrong.
Timing to get a Contract for Alternative Finance is minimum.
Normally after that all requirements are confirmed and the Client passed a positive due diligence, timing to issue a Contract to start the finance program according wealth enhancement or project funding needs is around 15 – 20 days. As is evident, there is no comparison with the biblical and uncertain times of Traditional Finance.
Also if different financiers can have different tolerances, no Lenders in their right mind will accept to issue a binding lending terms and conditions without he confirmed and checked the minimum requirements list as per below description.
When you present a project to a Financier to be funded according the Traditional project financing option the documentation must be genuinely at ‘Shovel Ready’ stage which it means that the documentation will at the very least include (i) proof of land/site ownership, (ii) signed off-take agreement, (iii) engineering procurement and construction (EPC) contractor agreement, feedstock agreement where needed, (iv) the company or SPV, (v) feasibility studies, (vi) permits and permissions, (vii) LOI, MOU, HOA etc…, (viii) financials. Then, you can start your funding process without to have ready all or part of the mentioned document list; this gives an impressive vantage about to manage the overall project timing, the funding phase can start much earlier and much earlier the project will start to release the expected profits.
You can make your financial goal starting with an investment budget less then the budget necessary to apply to Traditional Finance.
As you are aware genuine Financiers ask for a minimum 5-10% of Total Investment Value (equity participation). The equity participation is calculated on the total project investment value, it means that it is very expensive and it needs huge economic efforts in the starting phase of the project. On the other hand, an Alternative Finance funding program can start with an Asset with minimum Face Value of 10 million EUR/USD/GBP. It is clear that the price to get the availability of the asset (normally around 35-42% of Face Value) is less than the requested equity for Traditional Finance.