How is collateral raised?

The bank purchases A-rated insurance instruments of guaranteed face value from brand-name banks who already own the assets. The bank has multiple cooperating other banks directly selling the assets, which are at a discount because they are like “annuities”. The banks have hundreds of billions of dollars in such assets at any given time, so there is no shortage, and arranging purchase is relatively quick and easy.

Purchase of the collateral assets is done by conditional Escrow set up by the selling bank that currently owns the asset portfolio that will be used to cover the customized loan structure amount for the project client. That means (1) the assets are “pledged” to the lender in bank Escrow, so the lender can issue a loan against pre-identified specific assets as collateral, and (2) the collateral is paid for only from the loan when funded. This allows the bank to quickly provide unlimited collateral for any project funding transaction, without needing any of its own additional capital liquidity or investment. 

The bank very carefully calculates a proprietary formula that ensures that the funding package covers all collateral costs and the success fee, while yielding 100% net working capital for the client project at a low equivalent interest rate on the net funds received by the client.