This is the second in a two-part series. Part one (Do You Really Know What it Takes to Close a Solar Project?) can be found here.
Financial due diligence is critical early in the relationship between a solar developer and a prospective solar client. Without it, there may never be a mutually beneficial, long-term relationship.
Many solar developers, especially those with little experience in the field, have a certain level of discomfort when it comes to asking about financials. Explaining the financial due diligence process up front however, delivers two benefits:
- It will win the respect of prospects that have the financial ability to finalize a deal; and
- It will prevent you from wasting time with the prospects who don’t.
Your solar finance team will deal with a myriad of little details, but the two big “asks” that need to be established very early in the relationship are:
1) “Given your business model, cash flow, etc., what do you feel is the best financial path forward to pay for this project?” (and if they aren’t sure, what can you do to add clarity to that decision?)
and/or
2) “Assuming that there will be some type of financing, does your company have the credit worthiness to finance this as an owned project, lease, or PPA? How can we help to provide you with the things you need to make that decision?
In both cases, the finance question is posed as a “to do” for you as the solar developer to help further the prospect’s knowledge (adding deeper roots to the relationship in the process) and very clearly illustrating what financial, credit, and reporting requirements will be needed–all in a non-threatening, consultative manner.
Once you have provided your documentation requirements, your prospect will have clarity in their reporting needs, and you can ask what makes the most sense from their perspective.
No matter what choice they make, they will typically need three years of audited financials. They should see that in front of them in the documents you provide at their request, and it will give you a chance to gently remind them that this requirement cannot be overlooked as you move forward.
If you are still smoothing out your technique to discuss financial matters early in the relationship, make a note of two very simple points that should make this part of the process a bit easier to absorb:
- CFOs and company accountants know that this type of transaction requires audited financials. If all is good, and they are sincerely interested in moving forward with the project, they will be happy to share that data; and
- If they are not immediately forthcoming with financial data, it could be a red flag. Maybe they are habitually slow to pay, or maybe their interest in a solar project is less sincere than you think. Either way, your relationship may need a reality check.
One of the benefits of the Sunvestment Group online platform is that our format standardizes and streamlines the collection of the necessary financial documents and other pre-development paperwork. We help you to go through the financial checklist in a very professional and succinct fashion, while gathering all of the necessary details. From a client relationship perspective, I’m sure you will agree this is much better than getting bits and pieces of financial information through multiple emails and phone calls over a period of months.
In addition, financiers are much more likely to spend time doing a quality evaluation of your projects if you’re known as the one who consistently gives them all of the required information up front. Long term, this makes you more valuable to your clients, as they see a quicker turnaround in contract terms or requested inquires.
Ultimately, they will feel that you are giving them the attention this kind of project deserves — that alone should inspire you to bring up the financial process early in your discussions.
Sign up and try Sunvestmentgroup.com today. There are no fees to sign up, and it will give you the tools you need to navigate the financing aspects with clarity, tell you if a given project is financeable, and enable you to determine if the client relationship will be a long-term, mutually beneficial one.