A solid financial plan is critical to getting your project funded

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The number one stumbling block for a Canadian bioenergy project is a lack of adequate financing. Previously, I’ve discussed the importance of a vision and a functioning team, but without adequate equity and capital investment, the dream could die. Credit strength questions are often left until the end of the project, with the hope that it will come together somehow. I’ve seen elaborate business plans without even a simple pro forma income and expense spreadsheet. Often there is no construction budget, cash flow timeline, or detailed breakdown of income sources. To launch a successful bioenergy project, you must start with a solid financial plan.

In the movie Cool Runnings, a Jamaican bobsleigh athlete asks his bank manager to sponsor his dream of competing in the winter Olympics. The bank manager cannot contain his disbelief and scepticism, and breaks into uncontrollable laughter. Fortunately, the movie is a comedy, but if you have been working in bioenergy for long, you know the feeling. We may like comedy, but we hate rejection, so we often procrastinate and avoid this difficult, yet vital, task. Bank managers are not the enemy, they are the guardians of our savings accounts and are paid to evaluate and minimize risk.

So let’s look at what’s required to arrange financing for your project, rather than complaining about the bank’s lack of vision. You may only get one chance to impress an investor or lender, and that person is faced with numerous projects vying for investment dollars. Which of those projects would you pick? The professional answer is: the one that has the least risk, the most available cash, and the best financial plan. You cannot walk in with no off-take market agreements and no money in your back pocket and expect someone to write a cheque based on your enthusiasm for the project. Think about why so many announcements are made and so few bioenergy projects are actually built.

At a recent bioenergy conference, a bank manager said to the crowd of project developers, “You need a secure 10-year wood fibre supply agreement, an off-take market agreement for five years at 80% of production, proven cash flow, and 60% equity.” He later told me that he was trying to chase away the ”tire kickers.” I have worked with this lender before and know that he would consider projects with lesser qualifications. However, your project needs to be prepared for that level of scrutiny. I can guarantee that a lot of prospective bioenergy groups went home discouraged that day; the lesson is that you need to be thoroughly prepared before you approach a potential investor or lender.

For a bioenergy project to be successful, you must focus on the need for financing during the early stages of business plan development. Map out a strategy on how to raise sufficient money. This may be the most difficult part of the project. There are several key components to creating a solid financial plan and attracting potential investors and lenders. Ask yourself the following five questions.

1. How much cash am I prepared to invest? The easy answer is “the more, the better,” but realistically, a target of 25% of the project costs is a good place to start. You may need to share the equity risk with other partners to get there, but it’s better to deal with this issue up front, rather than being told later that you don’t have enough of your own capital in the project to qualify for financing. These days, getting 95% project financing is near impossible. The more money you have available, the lower the perceived risk and the greater the chance of getting the project financed under attractive terms.

2. Do I have relevant business experience? If, for example, you have never made a biomass pellet or you have no wood harvesting experience, this issue needs to be addressed. The goal is to minimize risk and stand out in the crowd of bioenergy project developers. If your skill set is lacking, try to find a team member or committed business partner who can fill the experience gap. The people involved are very important, as it’s up to them to deliver on the business plan.

3. Do I have a related company with strong credit that can offer support? This could make a huge difference in how the project is perceived, as it shows successful business experience and a willingness to put your proven expertise on the line. It is extremely difficult to arrange financing for a bioenergy project that does not want to have its parent company back it or its owners sign personal guarantees. If you are a start-up company with no parent company backing and limited cash resources, you should be prepared to look outside of traditional banking and be ready to consider joint ventures or other creative partnerships to access capital.

4. Do I have a financing advisor? Experienced project developers know it’s a good idea to pay for feasibility, engineering, and market studies, and they also realize the value of financing advisors. A good broker/advisor searches for project  funding from numerous sources and stays current with the latest financing developments. As a new industry, bioenergy financing can include numerous options, depending on credit strength, project size, and company history. An experienced financing advisor can help you sort through the options and point you in the correct direction while minimizing time wasted.

5. Do I have a spreadsheet-based financial plan that can model different scenarios? With a computer-based spreadsheet, you can make quick and accurate changes to your financial plan based on any “what if” questions or changing feedstock and market conditions. One project I am advising is on its ninth version of its financial plan, which remains accurate for today’s inputs and market conditions because it was built to model different scenarios quickly and easily. Your plan must be accurate to make it to the top of the investor’s list, and the ability to make quick changes based on market developments shows a high level of sophistication to a potential lender.

I have not yet mentioned government funding, but that is not an oversight. Far too many project developers are chasing government grants in the hope of securing the additional funding needed to turn a project into reality. In truth, accessing government money is a time-consuming process and, if you qualify, the money often comes after the project is complete, not during the construction phase when it’s really needed. Grants can help, but they’re not the easy money many people believe they are.

You can be a start-up company with minimal cash, but you must have a thorough financial plan that includes income and expenses, cash flow projections, and a construction budget. It is also a good idea to work with a financing advisor who can get your plan to the right people. Remember, if it were easy, everyone would be an Olympian. When discussing your financial plan, team, and vision, keep in mind that potential investors and lenders are looking for shared risk and good credit strength. Start building your credit strength now.

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Financing your greenhouse project is like training for the Winter Olympics

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On the lead-up to this year’s Vancouver Winter Olympics, our thoughts were on the athletes and all the hard work and sacrifices they made in making their respective teams. They started with a dream that might have begun when they were only six years old. It doesn’t matter how or when the dream first formed, it only matters that after tremendous sacrifice and hard work, they were able to fulfill their goal of competing in the Winter Olympics.

In this six-part series on financing your greenhouse project, I will focus on a 10-point checklist that will help you expand your project idea into an operational business. I will discuss securing the location, the marketplace, equipment selection, business plans, and how to build your credit strength. The analogy of “training for the Winter Olympics” will remain my focus, because in this marketplace, if you are not serious about your involvement and preparation, then you are not ready to move your project from dream to reality.

After joining Atticus Financial Group in 2004, I was quickly introduced to the concept of equipment financing and how that might apply to the greenhouse industry. A month into my new career, a local greenhouse grower led me on a tour of his biomass boiler room and then pointed out that he had used an equipment lease to finance his multimillion-dollar boiler system. The door opened and my dream started – helping others use equipment financing to fulfill their dreams to enter the greenhouse marketplace. The real challenge is how we move your dream from a vision to the reality of a successful business.

What are the qualifications for sports for business success?

As an example, if you are interested in joining the Canadian bobsleigh team, the team website ( lists the attributes required to participate: explosive power and strength, speed, self-motivation and hard work, and being a team player. In over five years of financing projects for the greenhouse and bio-energy industries, I recognize that these requirements are also needed for individual and corporate business success. Do you have the courage and determination that is required to plan and practise in making your dream a reality?

Are you a serious corporate athlete or just playing in a recreational league for the fun of it? Many visionary people across North America have the dream of building a greenhouse in their neighbourhood, and some even have the property secured, but very few are willing and able to push off and ride the equivalent bobsleigh through the twists and turns of an Olympic course. The reality is that no one would jump into a bobsleigh without doing their research and then training with an experienced crew.

Along with everything else, you need a sense of humour

No doubt there is risk and reward in this sport, as there is in any business endeavour. So my goal in this series is to help

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Leasing air quality control equipment

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With the new air quality emissions regulations coming into effect in September 2010, you may be researching what type of air quality control equipment you are going to install. Whether you choose a bag house filter system, wet scrubber or an electrostatic precipitator (ESP), you are still faced with the same question. How are you going to pay for the required air quality control equipment?

Did you realize that you could use an equipment lease to finance and eventually own your equipment choice? It is only recently that equipment leasing has expanded from its original market of trucks, tractors and forklifts to become a popular equipment financing option for a wide variety of equipment in the greenhouse industry.

Each greenhouse operation and equipment project is unique and your variables will be different, so if you are going to consider equipment leasing, it’s advisable to work with a leasing specialist that knows your industry and equipment requirements. Reg Renner of Atticus Financial Group has over 35 years of local greenhouse / horticultural experience and would look forward to meeting with you to discuss your equipment financing requirements and specific circumstances. Call Reg at 604-612-5674 for more information.

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Financial Options for Growers

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green house leasing optionsHow many times have you heard this comment in the greenhouse industry – “How am I going to pay for it?” In this time of volatile energy costs and increased competition in the marketplace, greenhouse operators continue to hesitate and ponder about upgrading their present processes.

With so many demands on your cash and capital budget, it becomes a challenge to decide which equipment to install and how to pay for it. It is okay for a grower/ owner to stop and take a second look at how they might reduce their input costs or increase their yields by taking advantage of technological advances. It may be a great idea with solid paybacks, but installing the new equipment requires the correct financing option, and that requires planning and insight. Therefore, the goal of this article is to ensure that you know what financial options are available to you, the greenhouse grower/owner.As a greenhouse grower, superintendent and manager from 1970 to 2004 and now a financing specialist for the past five years, I have been welcomed into many agricultural businesses to see how they plan and implement their financing strategies. I believe that this shared experience will help you as an individual grower and benefit the greenhouse/agricultural industry as well.

The main financing options include paying cash, borrowing from the bank or using lease financing. Paying cash seems the easiest and has historically been the chosen option for greenhouse growers who believe in the mantra…”don’t buy, until you can pay for it”. However, with the increasingly sophisticated and significantly larger greenhouse operations of today’s marketplace, leverage (borrowing) has become more of an acceptable and desirable option to use.

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