Three Mistakes to Avoid on Grant Applications

Three Mistakes to Avoid on Grant Applications

Recently, SRF founder Michael Sussman wrote about the mistakes most commonly made by rail businesses when presenting their projects to attract capital. His observations on working with banks and investors got me thinking about my experience helping companies and organizations apply for grant funding. Among the potential pitfalls in the grant application process, here are the big three that need to be addressed for success.

First, many folks who are seeking government or foundation funding fail to adequately review the project eligibility, application requirements, and selection criteria. This leads to incomplete submissions and irrelevant content that doesn’t correlate to what the reviewing board wants and needs to make a decision. All information pertaining to a program’s target sector, project types, insurance requirements, grant match requirements, document formatting, and other details are typically presented up front by the grantor and should be fully understood by applicants prior to submission. The application format, flow and content must strictly follow the instructions provided. Give yourself plenty of time early in the process to conduct these critical steps. To avoid wasting time, use the Q&A process to confirm that your project is eligible for the grant program.

Second, it is critical and yet uncommon for applicants to write a clear and concise grant narrative that fully describes the designated use of funds. Exactly how will you deploy the new capital to advance your project? Will you be using the grant funds to launch a new project or grow an existing one? Be as detailed as possible, so award committees are confident that you have planned appropriately for where the money will have the greatest impact.

Third, applicants must articulate the wide-ranging benefits that will accrue to stakeholders. Grantors want to know how their capital will impact communities, employers, workers, new jobs, regional growth and more. Provide evidence for these project benefits by including as many letters of support as you can gather from elected representatives, economic development officials, shippers and other stakeholders.

We look forward to hearing about your experiences with grant funding and any questions you may have.

Two Mistakes Rail Businesses Make

Two Mistakes Rail Businesses Make

For 25 years, I have dedicated our advisory firm to helping rail businesses and rail projects attract all the capital and success they deserve. Having spoken with thousands and worked with hundreds of clients, we see a pattern in almost all their presentations and approaches when trying to secure funding and support. Enthusiasm is high, clarity is low. Belief is great, facts are short. Frustration rages, progress eludes. Let’s reflect on and learn from this dynamic. Perhaps, you’ll recognize it in your own efforts. I invite you to respond with your thoughts and ideas.

Individuals and teams presenting rail projects for funding can expound on their project for hours but miss two basic elements of effective business communication. The first is that while they know what they want to say, they haven’t considered what the listeners want to hear. The second is that they don’t introduce their project logically before they are off and running with voluminous verbal and written material.

Too many project presenters focus solely on the promise of their project, without covering the risks. They either have not taken the time to anticipate an investor’s concerns, or they don’t want to for fear of opening a can of worms. Yet those are the only worms that can catch a big fish, so understanding and thoughtfully addressing them is job one. Funders, lenders, and investors will have very logical concerns. The more they express these the better, as that is how you know they are interested. Presentations should proactively surface and address the concerns that any thoughtful investor would have about a project or company. Pinpointing the risks along with how well you have planned for mitigating them has to be at the heart of any successful rail project plan. That is the only way to come across as an intelligent and successful entrepreneur who represents a sound investment.

Business people are keen on delivering file upon file of drawings, plans and related project material, yet they rarely write a clear executive summary and introductory letter. These are critical elements to assist an investor or lender in entering your world, regardless of the overall vision and merits of your project. They don’t have your inside track on what it’s all about, and you need to pave the way for their understanding.

When have you made these common mistakes and possibly left lenders and investors in doubt about you or your project?

Three Mistakes to Avoid on Grant Applications

Closing the Gap Between Lenders and Railroads

Which is greater right now? The national political divide or the chasm of misunderstanding that railroads face with communities, government, and lenders? Both divides must be bridged for America to be great.

Certainly, the misunderstanding that plagues railroads hinders good projects, good companies, and good communities. We all suffer in the balance.

For 25 years, Strategic Rail Finance has been a warrior for rail development that serves the economy, the environment, and the community. We continue to create funding and growth strategies for many of the rail industry’s biggest challenges. In more than a thousand meetings in Washington, we have had the opportunity to help educate Congress and the Executive Branch. Two decades of interactions with owners of shortline and regional railroads have taught us plenty. In 2007, we created a non-profit transportation consultancy, OnTrackNorthAmerica, to advance comprehensive transportation planning and investment.

To this day we encounter banks undervaluing assets of rail-related companies, citizens minimizing the contribution of railroads, and government planners misunderstanding the transportation marketplace. We aim to share what we have learned—what does and doesn’t work for growing railroads — from financial statement analysis to project scoring to land use planning.

For this launch issue of Insights from the Field, let’s shine a light on one particularly harmful and rarely-grasped practice at the heart of nearly all business’s borrowing relations with their lenders. The documents executed at closing of a typical loan transaction more than likely assign the lender a lien on all the borrower’s assets. Even as loan balances are being paid down, the documents give the bank a lien on not only the assets owned at the time of closing but all the assets brought into the company until the loan is paid in full. Since businesses use their borrowed capital to grow, the company’s assets will have grown over time. It is likely that there is now more inventory, equipment, vehicles, receivables and even cash. While the bank gets more secure each month, management is not able to use these additional assets to access additional capital to expand further. Banks love this arrangement and you won’t hear much about it in the business literature.

This status quo has had a particularly harmful impact on rail-related companies that often operate with less access to capital than businesses of much less stability and importance to the community. Their assets and contribution are misunderstood and under-appreciated. It’s time to bridge this divide once and for all, to fully realize the contribution of rail transportation to national and local vitality.

Insights from the Field is a publication of Strategic Rail Finance. Feel free to share it with colleagues. All issues are available on our website if you would like to add or comment. Or simply respond to this email with your thoughts.

Capital Tips From SRF

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.

Winning With Banks, Investors and Buyers

Winning With Banks, Investors and Buyers

#1 How Financing Has Changed Since 2008

There is an abundance of debt and equity capital available for good projects and companies.

However, the process for attracting that capital should no longer be left to the last minute or handled while the clock is ticking down on a transaction.

Banks ask for three times more information and now they actually read what they ask for.In 2009, they were even asking for, and reading, applicants’ home mortgages to see if there were any upcoming adjustable rate balloon payments that could upset the borrower’s financial stability. That practice has receded, but the demands to understand the entire landscape of a business person’s financial life has not.

Lenders want to know about the financial stability and ownership of all related companies.Even partial-ownership in other companies triggers a demand for financial statements and full scrutiny.

Personal credit matters more and personal guarantees are almost always required.Evenprincipals of larger companies (over $50MM in revenue) are now required to present personal financial statements and their personal credit score is part of the credit decision.

Expect questions right up to the closing.Additional due diligence questions will be asked on previously reviewed topics as the due diligence process moves through different levels within lender or investor organizations. Welcome all good questions as a sign of engagement.

Banks, investors, and buyers are more interested in the rail industry than any time in the last 30 years.It is well worth buckling down and focusing on your capital-raising or business sales campaign. Banks are lending and the rates start at 3%-5%. Equity capital providers and buyers are willing to pay high multiples for rail-related companies.

My next post will cover the importance of preparation before reaching out to banks, investors, or buyers. In the future, I’ll follow-up with each of the steps to succeed in borrowing, raising equity, or selling your company.

If you would like to discuss a debt or equity raise, email us here

#2 Show Up Prepared

All serious lenders, investors, and buyers will have probing questions.

More effective than reacting with off-the-cuff answers is to lead with a presentation that anticipates the questions. Almost all businesses have unique elements that show up on financial statements as weaknesses. Fortunately your business is more than the numbers on your financial statement. In fact, most companies’ financials provide limited insight into the real strengths and opportunities of your business. Head off unnecessary concerns by guiding readers’ understanding from the first line of your presentation.

Do not contact lenders, investors, or buyers until you have prepared a comprehensive presentation of your business.

As soon as you announce your intentions, interested folks will begin asking for information. That is the worst time to be scrambling to gather documents and explanations.

Successfully raising capital or selling a business requires your energy and focus.

It should not be approached in the ‘spare time’ of an executive’s week. The impression you make on a lender, investor, or buyer hinges on the thoroughness of your presentation and the timeliness of your responses to them.

Understand your financial statements before being asked about them.

Be prepared to explain every line of your statements when asked by thoughtful readers. And head off unnecessary questions by using language that communicates clearly. (There is no need for verbosity such as ‘Accretion of Capital Grant Equity’ when ‘Grants Received’ gets the job done.) Confidence will flow when both you and your financial statements are clear.

Research lenders’ characteristics or buyers’ appetites and target a limited number of candidates.

Campaigns that focus on the most likely banks, investors, and buyers produce much better results than the typical shotgun approach. It isn’t easy but you can identify higher-probability targets for your particular capital need. [This is where, frankly, Strategic Rail Finance shines.]

Preparation is the key. Our next post, ‘Manage Your Credit Identity’ will cover a critical element of your preparation. We will provide specific instructions on the steps for managing your personal and business credit records that every lender sees.

If you would like to discuss a debt or equity raise, email us hereIf you would like to discuss a business acquisition or sale, email us here


#3- Manage Your Credit Identity

Most business owners do not know that the timeliness of their payments to suppliers is compiled by Dun & Bradstreet into a database accessible by lenders who base much of their credit decision on this “Paydex” score.

Following are the step-by-step instructions for finding out your score before applying for credit. Knowing you have a great score empowers you to stronger negotiations and knowing what has lowered your score enables you to make any needed improvements and/or corrections.

You can access your Paydex score by signing up for Dun & Bradstreet’s “Credit Builder Basic” at a cost of $84 per month at

Skip the $10,000 per year “Concierge” package. We recommend signing up for a couple months of the basic package to tune up, then revisit it once or twice a year to check in.

We recently had a client who’s Paydex score had dropped from an impressive 75 to a dismal 32.

Upon checking we noticed that their report indicated a large overdue payable to their law firm. We provided D&B with a letter from the law firm stating that the balance due was within their normal credit terms, growing during a lengthy business acquisition process and had actually since been paid. D&B raised the Paydex score back to 75 and we were then able to secure financing for our client. You can also use the Credit Builder Basic membership to add supplier relationships that don’t already report to D&B.

Almost all commercial credit decisions now hinge on the personal credit score of the business’s principals along with the Paydex score of the company itself.

Business owners should know everything on their personal credit report which can be obtained at One of the three credit reporting agencies will be available for free, but during critical times, it is better to obtain all three at a cost of $33 to uncover information appearing on one but not another.

Personal credit scores under 625 are problematic.

Over 700 is where you want to be; the closer to 800 the better. Once you have your own report you can include it with credit applications, directing the lender not to pull a report until they absolutely need it since third-part inquiries lower your credit score.

Using credit cards to their lending limit, even when one pays in full and on time, still lowers one’s credit score, as the ideal percentage of balance to credit limit is 20%.

If you use credit cards extensively, whether for business or personal use, you can preserve your credit score by making interim payments during the month to keep the utilization rate close to that 20% ideal. Managing your credit identity is one aspect of smart capital management. Our next issue in the “Winning” series will touch on the ways to communicate about your business beyond the limits of what your financial statements convey.

If you would like to discuss a debt or equity raise, email us here

If you would like to discuss a business acquisition or sale, email us here


#4- Beyond Your Financial Statements

If financial statements were sufficient for gaining all the access to capital that a business deserves, we would not have many clients. Financial statements handed over to a banker as the primary and often only presentation document do not communicate the real strength of your business. They are written primarily to meet the rules of accounting and tax reporting, whether you are promoting your business prospects to a lender, investor, or buyer.

Your financial statements must be augmented with a complete set of supporting documents that portray the real value and opportunity you have built. Our clients and indeed most business people have a strong positive feeling about their business. The goal of your presentation is to communicate in a way that others can base their lending, investment, or buying decision on that feeling, even get the feeling themselves.

What is the story of your business? Where has it been, where is it going, and what is exciting about your enterprise? Do your best job of writing a narrative introduction that communicates the context that you want readers to appreciate as they read your presentation and financial statements. Then continue the narrative as you introduce the supporting documents that constitute the full picture of your company. You’ll want to provide readers with insight into your strong customer relationships, outstanding project management, staff experience, and all the other aspects of your company’s stability and potential.

You and your business are much more than your financial documents. Remember, no one goes to a restaurant to eat the menu. The path to making compelling presentations begins with your willingness to communicate proactively about your business with all of its strengths and opportunities as well as its weaknesses and challenges overcome. All businesses have warts. In the process of promoting the strengths and opportunities of your business, it is also critical to illuminate the warts. Think about presenting the company missteps through a coherent explanation that includes data and documentation on how you have addressed the problems.

Challenges overcome typically become the strengths of your business. Your forthrightness and willingness to communicate proactively will instill in bankers and businesspeoplea sense of trust in your presentation. They are then more likely to accept your asset valuations.

Our next issue in the “Winning” series will provide specific ways to present assets that enhance others’ appreciation of their value.  If you would like to discuss a debt or equity raise, email us here If you would like to discuss a business acquisition or sale, email us here 

#5- More Value for Your Assets

Your business’s assets include equipment, buildings, land, inventory, and accounts receivable. Yes, they are represented on your financial statements, but in a limited way that meets tax and accounting rules. This constricting treatment produces a major gap in lenders’, investors’, and buyers’ understanding and consequent valuation of your assets. Assets, particularly in railroad and construction companies, become “strewn across the landscape”. In other words, they are acquired, deployed, stored, and parked from one end of the company’s reach to the other. Before you know it, no one in the company has a handle on how much each item originally cost, whether it was bought for cash or financed, the current condition and value, and most importantly what it all adds up to in real equity.

It is this equity that can be leveraged into higher and better borrowing options and favorable buyer and investor offers. As a business manager you should create spreadsheets for each of your asset categories with individual lines for every item you own. Make these charts clear and complete with all information filled in. For equipment, the columns will include Manufacturer, Model, Serial Number, VIN Number, Color, OEM Options, and Add-on Equipment, Garage Location, Original Purchase Price and Date, and then your honest valuation. Buildings and land column labels should include Property Addresses, Description, Tax Parcel Numbers, Financing Status, and again your honest valuation or recent appraisal figures. Accounts Receivables should be presented with Date Invoiced or Aging and be free of all uncollectable amounts. It is counter-productive to “puff up” your asset values. Both your thoroughness and your honesty will lead to higher asset valuations by bankers, investors, or buyers. They are much less likely to institute the traditional “haircut” when they review a presentation that reflects your responsible, professional asset and business management—a presentation they can “hang their hat on”.   Given the high cost and value of assets in these “Capital-Intensive Industries”, many of our railroad and contractor clients are also de facto equipment and real estate companies. The short- and long-term benefits of tracking, charting, and presenting these assets thoroughly and thoughtfully are numerous.

Once you put the tracking systems in place you will have built a pathway to much greater access to capital.Borrowing levels, rates, and terms, as well as investors’ and buyers’ offers hinge on the thoroughness and clarity of your asset presentation. This can be as important as your profit history.

Our next issue will cover organizing tips for your business presentations. All prior issues in the “Winning Series” are now posted on our website for your reference anytime you want to learn about accessing more capital.  


#6- Winning Presentations

You live and work with every detail and nuance of your business, while banks, investors, and buyers come to your presentation with very little understanding. Your presentation should introduce readers to your enterprise and goals in a logical, organized manner, from the title to the first line of the narrative introduction, through the “Use of Funds,” to the very last word of thanks for considering your opportunity. Include a table of contents and page numbers, and think about the best way to create this presentation (including delegating to your ten-year old niece) in a 100% electronically transmittable and readable format, most likely using pdf files. The organization and professionalism of your package provides readers with an impression of your management capabilities. It is highly counter-productive to email a barrage of individual documents that have to be ordered and digested by the reviewer. Your presentation should look and read like the best of our high school research assignments—the ones that got us a check, a plus sign, and an exclamation mark from our teacher. As we know, transmitting documents electronically has its pitfalls. Since so many funding campaigns succeed or fail on the applicants’ and lenders’ focus, it is important to avoid these pitfalls on the way to smooth interactions with lenders, investors, and buyers. Here are the technology issues you can overcome with a solid presentation format:

  • File sizes too large to email
  • File sizes too large to email as a group
  • File names that aren’t clear to others
  • Narrative and related financial reports aren’t coordinated
  • Email attachments are presented out of order.

You can easily compress your larger pdf documents using the free program at Among the many free or low-cost file sharing programs available, I am confident in recommending and Google Drive. You can share your presentation documents, providing a secure link to just the folks you want to have access. Label and position files in your folder in the order you want them read as part of a coherent process for readers to learn about and appreciate the nuances of your business success and opportunity.

And lastly, even if you are a fluid writer, jump into your thick skin and find someone to edit your material for correct grammar, spelling, and sentence structure. Winning presentations attract more capital when they convey the same high-quality professionalism as your business itself. If you would like to discuss a debt or equity raise, email us here If you would like to discuss a business acquisition or sale, email us here

#7- EBITDA vs. Cash

When presenting your business to banks, investors, and buyers, is it more effective to use EBITDA or some version of a cash formula in your financial projections? This discussion is fortunately going to be addressed in layperson’s terms as even seasoned businesspeople and their bankers can get confused on the topic.

Let’s get a basic definition of EBITDA out of the way first so we can get down to what really matters in presenting your business’s financial performance and projections.

EBITDA stands for “Earnings Before Interest, Taxes, Depreciation, and Amortization”. Our general rule is to make EBITDA presentations to buyers and investors, and cash presentations to banks. Prospective seller and investment candidates are best-served by using EBITDA as it tends to present a rosier picture of company profits. And these days, investors and buyers have come to use EBITDA in comparing investment targets.

But the best results with bankers are achieved by putting a cash presentation in their hands that clearly identifies the checkbook balance that can be applied to an increase in debt service. For the ultimate clarity, we break our client’s business down to each and every month going forward, so bankers can peer closely and comfortably at the applicant’s ability to make the new payments. They are used to working with muddy financial presentations that force them to discount what is presented. The clarity of a monthly cash-flow projection prevents the usual “haircut” that bankers give to applicants’ presentations.

There is no hiding the bottom line from bankers these days. Every application is scrutinized closely. What matters most is demonstrating that you understand your own business well enough to show where each and every dollar flows in and flows out on a monthly, not just annual basis. Businesses have to meet debt service requirements each and every month, not just on December 31. So give your banker what they need to hang their approval hat on — a monthly cash flow projection that shows the bottom line operating cash flow that can be applied to payments on the additional financing you want and deserve.

For further background on this issue, here is an excellent article at Investopedia. For assistance dealing with buyers, investors, or bankers, call us at 215-564-3122, or email


#8- Debt or Equity?

Our first choice for growth capital is an unexpected bequest from a favorite uncle who always had a jocular faith in our impending success. After that joyful possibility, is debt or equity capital more attractive?

Beyond the conventional consideration of this question (equity investment brings loss of control, debt requires repayment) is a more powerful way of thinking about business growth. “How can I optimize my debt capital before pursuing equity?” Arranging new debt capital (whether used or not) is like bringing cash to the negotiating table with potential equity investors.

Some projects are large enough that an investor partner is required to either add their own balance sheet strength or input their capital to yours. You can avoid debt payments over the short-term with equity capital. However, the real cost is pegged to the long-term value of your business. Upon your future success, this equity becomes the most expensive capital you will raise compared to the fixed, low-interest payments of typical debt.

Yes, equity capital has the advantage of a strengthened balance sheet from the capital injection and reduced cash flow requirements for repayment. But many rail-related businesses and projects will cash flow fine once funded, including debt service. So why give up ownership if you don’t have to?

For the strongest position at the bargaining table with potential investors, raise as much of the capital you need from intelligently-structured debt facilities. You will either have a 100% alternative in hand, or your business will be a more attractive investment because of its improved access to low-interest debt capital.

The key to all successful debt capital campaigns is the effective presentation of your business’s hard assets and the reliability of future revenue streams. See our Winning Series #4: Beyond Your Financial Statements for guidance.

I am reminded of a client, Progressive Rail, Inc., who thought prior to our engagement that they needed an equity investor because lenders had not been forthcoming with the capital to build their new transload facility. You can learn how we brought 130% debt financing here.

The work we outline in this Winning Series toward an effective debt-capital raise can be used in your equity capital presentations. And if you succeed in raising the capital you need without giving up hard-earned ownership, future success accrues 100% to you and your enterprise. And that is a Winning Strategy!

For assistance raising debt or equity, buying or selling a business, or advancing your growth plans, call us at 215-564-3122, or email

#9- Are They Right and Ready?

This series is all about pragmatic advice from our three decades of workrepresenting clients with banks, investors, and buyers. Issue #9 illuminates three of the most basic, yet critical success factors too often overlooked: 1) Targeting the right bank, investor, or buyer; 2) Determining if they have the time and attention to focus on you and your timeline; and 3) If selling your business, clarifying the capital strength of a prospective buyer.

Targeting the right lender, investor, or buyer begins with clarifying your own goals. How much capital do you want?  What characteristics in a buyer do you want? Do you want your employees to be retained? Do you want the investor to be hands-off day-to-day or involved? Do you want a bank with experience in intermodal, or contracting, or manufacturing? Does the bank have the appetite for your size transaction? The challenge with banks is that their marketing departments all trained at the school of “make it sound like we do everything for everybody!”

You don’t want to wait for the bank, investor, or buyer to determine if you are the right match for them; clarify if they are right for you before getting started. If your project involves, for example, a trash-to-energy recycling facility, search the internet for similar projects and uncover their financing sources. That is a good place to start.

Banks are notorious for saying yes, yes, yes, right up to the moment they say no. And how often does their no center on an issue that they knew about way back at the beginning. So it is incumbent upon you to help the banker express their “no” much earlier in the process, maybe in the first conversation. Emphasize what is unique and challenging about your project and give the banker the opening for saying no at the outset.

After helping the banker understand and embrace the rough outline of your company and your project, you want to ask, “Do you and your credit team have the time and attention available to focus on my application in time for a closing by X”?

When it comes to buyers, the targeting process needs to be as exacting as with bankers and investors. What profile represents the kind of buyer with whom you want to be working and what type of business would gain the most value from your company? And when you start interacting with a potential buyer that meets that profile, do they have the capital to close the deal? Before they get to do their due diligence on your company, they should have to pass your due diligence. Ask for and review their credit references and financial statements so you can determine at the outset if they can pay for your company.

At the end of the day, we want the best terms, closed on time, with the right bank, investor, or buyer for the long-term, not just this transaction. This takes clarifying goals and needs, profiling the right candidates, and then making sure they have the time, attention, and capital to close the deal on your schedule.

Most successful business endeavors require determination. Our next issue in the Winning Series is titled, “Determination Wins”. I look forward to sharing what we have learned about the value of determination in accessing capital.

For assistance raising debt or equity, buying or selling a business, or advancing your growth plans, call us at 215-564-3122, or email

#10- Determination Wins

How and when does determination contribute to a successful capital campaign or business divestiture?

At the outset determination is what propels you to commit enough of your time and/or your staff’s time to capital raising or selling your business. Don’t go into either without a clear intention and commitment to succeed by devoting enough time and resources.

We all juggle multiple activities, roles, and responsibilities. But accessing capital is the preeminent business management responsibility, underpinning the success of almost all significant growth.

Many entrepreneurs leave capital-raising until the transaction is already on the table and the clock is ticking toward a closing date.  Frustration often sets in when the capital raise doesn’t go as hoped for, or on time, often caused by not devoting top quality attention early enough. The time to start raising capital is before a deal or contract or purchase has been initiated, not after, when the time pressures may compel you to settle for a less attractive financing offer.

It’s much easier to be excited by the project itself then by the prospect of raising capital to do the project. But so often a project’s success is solely dependent on securing funding. The rest is often a fait accompli. Determination throughout to a well-conceived and well-implemented capital campaign or business divestiture is the paramount message of our ‘Winning with Banks, Investors, and Buyers’ Series.

Your determination should also be apparent in the response time and thoroughness of your communications. Make the right impression and keep everyone engaged by not allowing lag time when answering information requests. Our motto is that no client or banker has to wait for us. We always drive the process by our timely follow-thru on all matters.

As with many executive management responsibilities, capital-raising can be partially delegated to staff or a trusted advisor. But it must remain a high level responsibility. Raising capital is not just another accounting or administrative function. To be successful, you must maintain thorough control and awareness throughout the process.

Twists and turns will happen. What can point the way toward success is our determination. The next issue in the Winning Series, “How to Learn from Declines”, relates our perspective on declines as the key accelerator toward an ideal capital structure.

For assistance raising debt or equity, buying or selling a business, or advancing your growth plans, call us at 215-564-3122, or email

#11- How to Learn From Declines

More often than not our first choice of a banker, investor, or buyer doesn’t think we are ideal, or we don’t think they are ideal. In spite of our thoughtful targeting, we may not hit pay dirt with our first choice. The bank’s credit department says no, the investor wants too much control, or the buyer’s offer is too low. This is a key moment to master because it happens so often. As Nick Foles, quarterback of the Philadelphia Eagles says, “I give myself 24 hours to dwell on the loss or the win. Then it is time to move on.”

A bank’s decline, or a thwarted negotiation with an investor or buyer can tell us everything we need to know to move toward success, if we keep our heads up. As a matter of fact, at Strategic Rail Finance, we consider an initial disappointment with a bank, investor, or buyer a critically valuable step in our process.

If we followed all the steps outlined in our “Winning Series”, our presentation is already in pretty good shape and we picked a high-probability bank, investor, or buyer. But the environment for lending and investing and selling a business constantly changes, even from month to month, plus your business is unique. Often, it is the interaction with your first choice that informs you about the capital market’s current appetite for your particular business opportunity.

Reflect deeply on the decline or the demise of the relationship to uncover exactly what you need to know to now target the right bank, investor or buyer. You may need to identify someone that is more comfortable in your industry, or better understands your growth trajectory, or simply has enough bandwidth to consider your opportunity.

Based on this reflection, you may also want to adjust your presentation to highlight certain business plan elements and downplay others. Your approaches to current or upcoming challenges may need a stouter explanation or your past experience and success may need better illumination. The capital structure or loan request may need tweaking. What is most important is not succumbing to frustration or blame.

A bank decline can shine a bright light on the way forward. One recent SRF client case included a decline after two months of working with what we thought was an ideal bank candidate. Without skipping a beat, we initiated a second bank relationship with what turned out to be an even better lender, closing on the new financing four weeks later.

So use each interaction with a bank, investor, or buyer to inform your path to success. If you learn as you go and don’t give up, as we always say, “There is always money available for good projects.”

I am glad to have this opportunity to share our 20 years of experience as trusted financial advisors to the North American railroad industry. Our next and final issue in the Winning Series provides our perspective on how an advisor brings value to a capital raise or business sale.

For assistance raising debt or equity, buying or selling a business, or advancing your growth plans, call us at 215-564-3122, or email

#12- What's an Advisor For?

Every business owner has an existing bank relationship, has heard of possible investors, or knows of other businesses that may want to buy their company. And everyone can talk, write emails, and hand over their financial statements.

The reason to hire an advisor is to get the job done better, quicker, and with more certainty and clarity.

Many of our clients are already brilliant at what they do. Our value is based on our wide-ranging knowledge of the rail industry, government programs, and the financial community. As trusted advisors, we know how to think strategically about business issues and how to implement capital and growth campaigns based on sound logic and collaborative thinking.

A recent client came to us to find a quicker path to regulatory approval of a railroad technology used to great benefit outside North America. With our extensive knowledge of the industry, its people and dynamics, we were able to establish fast-track acceptance into an industry-led research program focused on our client’s technology domain. Our client knew much more about their product than we did, as often happens when engaging an outside advisor. The advisor’s role is to leverage your strengths for greater access to capital, buyers, resources, or knowledge so that you can advance more powerfully.

As experienced trusted advisors, we take responsibility for rising to the level of intelligence, power, and success of our clients. In addition to meeting the primary goals of the engagement, we take on the additional challenge of creating direct financial rewards or savings for our clients that more than cover our fees.

Strategic Rail Finance has a unique position as a trusted advisor specializing in the rail industry. Our bank relations include ten of the top twenty banks in North America and we maintain a huge network of relations with lenders, investors, insurance companies, equity groups, rail suppliers, consultants, contractors, service providers, and government agencies and committees. We are able to communicate across the spectrum of public- and private-sector stakeholder groups to identify resources that will contribute toward our clients’ success.

Many of us envision having financial statements so compelling that they attract all the access to capital and buyers we want on our preferred terms without having to engage a consultant. We want you to reach that level of profitability and success. We are here to help you get there.

That concludes the 12-part Winning Series. It is designed to provide a complete outline for successful capital raises. The entire series is available on our website here.

Thank you for reading and all the best in business and life.

For assistance raising debt or equity, buying or selling a business, or advancing your growth plans, call us at 215-564-3122, or email

Strategies for Successful Public Private Projects

Strategies for Successful Public Private Projects

Capitalization – The Financing Structure of P3s  

by Gerry Stoughton, SRF Public-Private Infrastructure Advisor

Part of a series highlighting strategies for successful Public Private Partnerships. In this series P3 expert Gerry Stoughton offers insights gained while orchestrating funding for major infrastructure projects for the Port Authority of New York New Jersey.

With P3s being applied to a growing variety of projects, it is increasingly important to find financing structures best suited to each. In assessing the merits of different structures, some fundamental considerations should be:  1) how much public funding to provide, 2) the desired amount of private equity, and 3) the level of complexity in the mix of financing sources.

P3s can involve various methods of public sector contributions to the project. Sometimes the project involves a defined public component, such as a series of approach roads, which would be entirely funded by the public party. In other cases, the public sector will fund a percentage of the overall P3 project cost. These public funds could come from federal/state/local grants or other sources available to the public entity – including their own financing through tax-exempt debt.

The amount of public funding for the project can depend on several factors. These include how the P3 project relates to the public entity’s capital planning priorities and how much debt capacity is available for the project under associated debt issuance limitations. Depending on the nature of the project and form of the public entity, a certain amount of public investment might be legally required. There are also non-financial considerations for the public party in terms of how they want to show their commitment to the project. Larger contributions often grab larger headlines. There are no set rules with regard to the public party’s financial participation in a P3 project; each project is its own unique situation.

Most public agencies advancing a P3 projects want to make sure that the private developer has a stake in the project’s long-term success. They want the developer to have some “skin in the game” by contributing equity. But there is a flip-side to having more developer equity. The developer’s equity rate of return will be higher than the rates associated with the rest of the financing package they bring to the table. The more developer “skin in the game,” the higher the cost of the overall project financing.

The public entity, as the procuring party, needs to determine what minimum developer equity contribution is needed (generally between 8 – 10%). Prior successful similar P3 transactions can often serve as a guide. Of course, developers can elect to exceed this minimum. Typically, however, they do not in order to submit the least costly financing plan. Occasionally the public side gets the best of both worlds. One developer team provides the highest equity amount and their total cost to design, build, finance, operate and maintain the project is still the lowest.

The primary funding source for the private developer will come in the form of debt. This debt mix should be based on characteristics of the project such as:  the length and spending profile of the design and construction phase; the time until commencement of facility revenue operations or payments to the developer; and the projected operation and maintenance costs post-construction. Typically bank debt will offer the most attractive short-term rates, while bonds and private placements will fill in the longer financing troughs and be used to refinance expiring short-term bank loans. Depending on the types of debt instruments, a tiered debt structure can evolve where some debt has higher priority than others. This is common when a TIFIA loan is one of the financing sources.

With a myriad of available instruments and varying maturities, the financing structure should not be unnecessarily complicated. The more parties involved, the more inter-creditor agreements and legal costs. There will also be more time required for all aspects of advancing the project. While a large mix of financing sources might yield the lowest effective rate, a P3 is ultimately a project delivery model with associated financing benefits, not merely a financing solution.  

Strategic Rail