- Percentage of working capital Stalwart can fund is dependent upon the valuation we can attach to the equipment and any value-add the provider of the service and/or equipment may bring to the collateral. In many cases we will ultimately structure the transaction as a refinance or a sale/leaseback. Where we can, we will also treat the provider as the vendor of the equipment. These structures may add significant value that can be utilized as working capital. The exact amount of working capital is really determined on a case by case basis.
- We can do Sale/leasebacks with this program so long as Stalwart is satisfied with the credit quality of the end user. Sale/leasebacks can be added to provide the necessary component of equipment in a Contract Finance scenario.
- Another variation of Contract Finance is to have a provider buy back the equipment currently on the investment grade customer’s books; then, enter into a service agreement with the investment grade customer. Large companies normally want use of the asset and not ownership.
- The more the service resembles a commodity the harder it is to put together as a Contract Finance transaction. Commodities such as coal, electricity, oil, gas, gold, etc. have well defined spot markets that fluctuate based on a number of variables. The well organized commodity markets allow investment grade end users to procure commodities without entering into special agreements. Having said that, it should be noted that the power of a relationship between the service provider and end user may be enough to swing the deal.
- We cannot fund a Sub-Contractor’s contract with a general contractor when the general contractor has a contractual relationship with an investment grade end user. The service provider has to have a direct contract with the investment grade end user.
- Short-term contracts are more difficult to put together. The shorter the term of the contract, the higher the IRR is to the service provider. Stalwart’s minimum term is 12 months.
