The Loan
Loans for lawful projects worldwide
- Project finance, working capital, start-ups
- Commercial construction and development
- Corporate acquisition, expansion, divestiture, and downsizing
- Purchase and maintenance of fixtures, furniture, equipment, inventory, machinery, physical plant
- Construction and development of infrastructure and non-lethal military projects
- Broad range of industries and business sectors
- No loans for unlawful purposes or for weapons, ammunition, munitions, lethal military combat equipment, combat vehicles, or combat aircraft
- Loan proceeds must be
used for a specific, lawful project.
- Borrower must initially provide detailed information about itself including company materials, project documentation, Annual Report, financial statements, and the like.
- Loan proceeds cannot be used to engage in unlawful activities including the purported buying, selling, leasing, and/or trading of guarantees and/or fraudulent “prime bank instruments.”
- Proceeds cannot be used
to invest in fraudulent “roll programs,” “high-yield programs,” or
“trading programs.” (See:
www.sec.gov/divisions/enforce/primebank.shtml,
and www.publicdebt.treas.gov/cc/ccphony9.htm)
- Structure 1 - Borrower arranges for its accepted guarantor to provide the guarantee to assure repayment of the loan. Borrower repays the loan as agreed. Guarantor pays the Lender's bank if borrower defaults.
- Structure 2 - Special entities may act in dual capacity of borrower and guarantor. May be accepted banks, insurance companies, Fortune 1000 companies and other large firms, municipalities, and institutions. Special entity borrower issues guarantee directly and repays loan. Special entity is responsible to pay deficiency to the Lender's bank if default occurs.
- Structure 3 - Special entity issues guarantee for another borrowing firm. Borrower repays loan as agreed. Special entity as guarantor pays the Lender's bank if borrower defaults.
- Structure 4 - Special entity borrows funds directly and re-lends funds to another firm. Special entity borrower is responsible to repay the Lender's bank in any event.
Face and Adjusted Loan Amounts
- Adjusted loan amount is the amount that borrower will actually borrow.
- Adjusted loan amount is based upon the face amount of the guarantee and loan fee.
- The face amount is the amount that will appear on the guarantee itself when issued.
- Adjusted loan amount may include loan fee.
- CAF mathematically discounts the face amount of the guarantee by the amount of the applicable interest rate (LIBOR + margin) over the term of the loan and by the amount of the loan fee.
- Guarantee is issued as needed to reflect applicable outstanding loan principal amount and interest due during loan term.
- There are two scenarios for guarantee face amount.
- Scenario 1 - Face amount of guarantee is determined to be a pre-designated amount.
- Guarantee face amount is discounted.
- Adjusted loan amount is the amount that the borrower actually borrows. It’s calculated to be less than face amount of guarantee.
- Adjusted loan amount includes loan principal amount plus all due interest.
- Loan proceeds will be
less than adjusted loan amount, as loan fee is
always withheld from proceeds when
disbursed.
- Scenario 2 - Face amount of guarantee is increased to include interest.
- Adjusted loan amount is increased to include loan fee.
- Borrower receives its desired level of loan proceeds after CAF’s lending bank withholds loan fee.
- When borrower repays full amount of loan as agreed, guarantee instrument expires and becomes null and void.
- Guarantee is then canceled.
- At this point, loan repayment has been successfully completed.
- CAF’s lending bank may grant loan extension(s) during the loan term if borrower has been repaying loan as agreed under loan agreement.
- For extension, borrower transmits
letter requesting extension to CAF.
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