Amid Nation’s Surge in Ethanol Production, IFC Leases $4.1 Million in New Plant Equipment

For more info, contact:

Gary Trebels
Vice President
888-554-4432 ext 1231

gtrebels@
ifccredit.com
When the owners of a currently-in-construction, start-up ethanol plant needed to finance new equipment essential to the facility, they came to IFC.
With a need for equipment funding, the company was faced with the decision of raising equity or acquiring debt. Rather than issue additional stock and dilute ownership, the company decided that lease financing would best suit their needs.
However, due the unique situation of the company, getting an equipment lease was a challenge.
First, as is the case with most start-up ventures, without history of strong financial performance, it can be difficult to obtain financing.
In addition, the company had specific lease requirements that needed to be met. A long-term equipment lease was mandatory, as it would coincide with previous long-term contracts for the purchase of the company’s ethanol and distilled grain products. The company needed a fixed financing rate to avoid the risk of interest rate fluctuations and to provide stability for budgeting. They also needed a low monthly lease payment to conserve as much operating capital as possible. And finally, the company needed advance progress payments to be made to its equipment vendors, a process where equipment is funded in part, before the equipment has been manufactured and/or installed, and before it has been used to generate any revenue.
Faced with these distinctive needs in a start-up environment, other lenders were not able to provide funding.
“The deal broke down elsewhere,” said Gary Trebels, Vice President of IFC.
Looking for a lender who could meet their needs, the owners came across IFC. Exemplifying the value-added creative structuring the company has become known for, IFC was able to provide a lease which exactly matched the ethanol facility’s needs.
“We were able to provide a 5 year, 1st amendment operating lease that met the needs of the company. We structured the lease so that our position is secured in front of the company’s senior debt, which allowed us to have some security. With that in place, we could provide the monthly payment, the term, and the advance progress payments that they were looking for,” said Trebels.
IFC provided the company with two separate schedules, the first with funding for $1.14 million to acquire a turbine which will power the ethanol facility. The second funds $3 million for grain handling equipment, which is used in the transportation and storage of grain from the railcar to the plant.
Progress payments have begun on the turbine, and will begin in December for the grain handling equipment. Progress payments will end in May of 2008.
The facility, when finished, will produce 37 million gallons of ethanol per year.
Ethanol is enjoying support from automakers and policymakers, and is touted as an environmentally superior alternative to gasoline.
Arising to meet increased demand, more than 40 new ethanol plants are expected to be constructed in the United States during the course of the next year, increasing U.S. production of ethanol by 30%.
IFC actively funds a wide range of equipment for ethanol facilities and more. For more information, interested parties may contact Gary Trebels directly at 888-554-4432 ext 1231.