Capital Tips From SRF

November 4, 2018

Capital Tips From SRF
RRIF Loans are Accessible With SRF's Assistance

Strategic Rail Finance drives its clients straight through the daunting process of applying for an FRA Railroad Rehabilitation & Improvement Financing (RRIF) loan. And most importantly, we integrate the RRIF loan with an overall financing strategy that maximizes current and future opportunities.

The advantages of a RRIF loan…

  • Finance business growth and enhancements (future revenue streams are valued)
  • Low-interest
  • Long-term (up to 35 years)
  • Flexible collateral requirements (can be limited to certain assets)
  • Principal payment delay (up to 5 years)

Strategic Rail Finance can help you decide if a RRIF loan is right for you. We also coordinate private-sector sources of low-interest, long-term financing. We have developed funding and business growth strategies for some of the most successful rail developers in the country and we would like to help you too.

Borrowing Principles in the New Credit Environment

As we tell our clients, banks are now asking for three times as many documents as they did ‘pre-meltdown,’ and they’re reading everything they ask for. For example, home mortgage information is no longer just a line item on a personal financial statement. In the new credit environment many banks insist on reviewing the potential borrower’s mortgage agreement to determine if there is a looming vulnerability to future rate increases. This, and many additional details of the owner’s personal financial life have become part of the due diligence process.

It is no longer two or three years of tax returns, it’s three; and don’t forget the tax returns for any related business entities. Now, every extra layer of corporate structure multiplies the time and attention necessary to present these details. We advise thinking twice before forming a corporation for every new business idea or venture. Lenders want complete information on all owners, and all related or subsidiary companies, even if it’s just an entity for equipment or property ownership. They are leaving no stone unturned, no question unasked. So, we often counsel our clients to close unnecessary entities and transfer assets into the parent company. Get used to this level of due diligence. It’s the new credit environment.

The primary success factor for borrowing these days is tolerance and patience for details – for the nitty-gritty of financial presentations. This due diligence will challenge your filing system, as documentation is requested for everything from property lease agreements to IRA statements.

Many banks are lending, but it is critical to ask for three references of recent business loans that have closed, and for you to contact those references. They can provide valuable insight into how the bank is operating and other keys to success. The goal is to determine if the representative with whom you are interacting is merely expressing this week’s marching orders from management, or if the bank is lending with consistency.

During our twenty-two years of financial advisory work, we have found that there is always money available for good projects, even now. If you believe in your company and your project, it is more important than ever to present the whole opportunity with clarity, and full documentation. Strategy matters more than ever, but determination matters above all.

Having Credit Pre-arranged is Like Negotiating with Cash

Waiting to line up financing until a deal has been struck is a frequent error in business. Too many businesspeople think they manage time well by waiting to strike a deal before they spend the time to get their financial house in order. Often overlooked is the power of sitting across the negotiating table in an acquisition or purchase with your financing options already established. Strategic Rail Finance counsels our prospective clients that the same power as having cash is available when you have financing lined up.

Borrowers also lose their advantage in dealing with lenders when a transaction has been teed up and a closing date is looming. Future borrowing power is diminished when they are forced to accept terms and covenants that could have been avoided if time was on their side and the lenders were the anxious ones.

Having credit pre-arranged results in lower purchase prices and better deals. Capital can be accessed with more attractive rates, terms, and covenants that enhance, rather than restrict, the future of your business. Call us now and explore your options. Prepare for your next growth opportunity.


Strategic Rail