Arriving at successful project financing is not an easily achieved task in today’s banking environment. Companies have gone away from traditional institutional financing in search of other more reliable channels of funds. This is where the advent of using bank instruments as a direct source of creating capital for project finance has opened up.

While it is true that a financial instrument is used for credit enhancement such as in the complicated structured financing employing collateralized debt; bank instruments can be used in a much more simplified fashion to unleash the power of bank credit lines needed to complete project finance.

Most any bank instrument with cash backed value can be monetized to provide the necessary collateral and security a bank lender needs when making a loan. So long as the underlying assets of the instrument is indeed cash or cash equivalent, and the cash asset and the bank issuing the instrument is rated high enough to achieve comfort, many different types of financial instruments can be used for financing.

It is important to stay away from financial assets that are given value by complicated credit valuations with multiple tiers of debt securitization such as mortgage-backed securities, collateralized debt obligations, and securities and bonds backed by corporate debt and other over-valued assets outside of cash backed assets or cash equivalent assets. These types of instruments used in complex investment derivatives helped plunged the financial world into disarray over the last decade, a mess which will take another decade at least to recover from.

Cash backed assets, such as those in the form of bank guarantees, letters of credit, standby letters, certificates of deposit, cash collateral accounts, and other more easy to understand financial assets make financing simple and straight forward. When these types of instruments are used as primary or secondary collateral in connection with a viable project, bankers have an easier time making loans for project financing.

However, if you are not a tycoon big name client with multiple lines of credit and long-standing financial history with top-tier banks most companies and individuals can forget making an attempt to acquire loans of the great magnitude needed for major developments and projects. This is where financial partners with credible financial services companies become important to companies on Main Street.

While the ability to issue top-tier bank instruments as collateral for financing is a crucial piece of the financing process, this does not preclude the importance of ensuring you have solid relationships with lending institutions that can ensure the safekeeping and ultimate return of the bank instrument. This means one must be able to provide a solid bank undertaking, which strengthens the trust and confidence of the investors and asset holders involved to know the lending process will not put the instrument and their cash assets in jeopardy should a default occur.

If you feel you have everything it takes to get financing, but only lack the right cash-backed security and guarantees necessary, seek a competent financial services company to help complete the cycle with you.

David Andersen is a consultant for BalboaTrade.com an online financial solutions company providing strong clients with valuable projects in need of funding together with asset holders looking to provide billions of dollars of bank instruments issued from top financial institutions and banks to be used as credit enhancement and security for financing.

You should contact him for more information here

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