Monetization Financing can make your Small Business a Big Business

Monetization financing is the conversion of current and future payment obligations

from investment grade entities into cash that can be used for any business purpose.

That is the definition, but it can mean so much more than that to your business. This type of financing will allow you to take on the big projects, I mean big projects. You will be able to offer a financing option to your client that could allow you to fund the project with no money out of pocket, either from you or from your customer.

Does that sound interesting?

Let me share an example of how this type of financing can work for you.

Let's say that you are a small project developer working on a project for a Bio Fuel Plant. Your plant will be taking the solid waste from a city and will help them save landfill space. The cost to the city will only be $50,000,000. Piece of cake. Every Venture Capital Firm and Bank will be knocking on your door to fund this project. After months of meetings and hearing the word no so many times, you think it is your new name.

But wait. There could be an alternative. Let's look at this deal through the eyes of Monetization Financing. We will look at what the city has to offer. They are currently paying a firm $6,000,000 a year to take the solid waste generated by the city. That is a given, and that cost could escalate unless it is locked into a contract.

Here is the good part, and this is where the monetization part comes in. Let's say you offer the city a solution to slow down the filling up of the landfill, you can lock in their waste disposal costs, you can even generate electricity for them that they can get at a below market price. The kicker is that they will need to sign a 20 year contract with you to guarantee that they can get all of that for only $6,000,000 a year, exactly what they are currently paying. Plus they get all of the other benefits.

Do you think they would be interested? You bet they would. This type of set up is a no brainer. The investor will lend on this project because the city is guaranteeing the payment to you each and every year of the contract. The investor is willing to do this because they are Monetizing the tipping fees for the waste that the city would be paying any how.

Another benefit to you, the developer, is that while the plant is under construction, your payments can be deferred for several years until the plant is operational. Cool, huh?

It is something to consider. But, the Obligor needs to be Investment Grade, the project must be $5,000,000 or greater. Almost all industries can be looked at and there are a multitude of ways to structure a deal. It will be well worth your time to consider this type of finance.

Monetization Financing can make your Small Business a Big Business

By: Robert Renk

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