Financing is tight. Underwriting standards right now, implicitly or explicitly stated, say, “We’ll only lend you the money if you don’t need it. In other words, you’ll need cash in the bank or liquid assets in the amount that you want to borrow that you’ll pledge to us.” Looking for an equity investor? Show me a very high ROI or, preferably, a payback in less than three years.
Your client comes to you with a wonderfully exciting project. You can’t wait to sink your teeth in. It’s been so long since you’ve seen one like this come along. But you’ve become wary, so you ask if the money is in place. The client replies, “Not yet but I’m working on it.” Your caution light comes on and you ask whether the client has sufficient funding to cover your services and the answer comes back, “ . . . no . . . but I’m going to cover you out of the first draw.”
So what’s an architect or engineer to do? It’s time for us all to get into the financial services business. No, I don’t mean that you need to add “The Bank of . . . “ under the name of your firm, but you do need to dig in deeply and quickly to learn how the types of projects your firm undertakes might be paid for and become an active participant in securing that financing.
There is plenty of money looking for a place to land, but those who hold it have become extremely cautious. But because that money doesn’t necessarily reside in the usual places, the typical financing sources for the things you’re used to doing may not be the only entities available. Which means that you have a wonderful opportunity to get creative in a whole new field. And let me give you an incentive: most folks who lend money pay a placement fee or commission to the person who connects their money with a worthy investment. For those of you who have never thought about this, a mortgage or financial broker often receives a commission that may reach the range of the fees for your professional services.
I can hear you saying now, “How unprofessional (and maybe a little sleazy) trying to hustle money.” Well, get a grip. Your workload is dependent on your client finding a source of funding, and I hope you’re smart enough after this recession has ground on for nearly four years to have stopped being a source of free financing to your clients by doing work and waiting for them to secure financing so they can pay you . . . or not!
So, here’s the plan. You’re going to start by learning how to “network.” In it’s most traditional form. That means meeting people who are interesting and interested in you, finding out if they know someone who knows someone who has money they want to put to work. It should all be done very subtly. You don’t just walk up to a client or friend, your banker or lawyer with a rousing, “Hey, how are you fixed for cash? Know anyone who’s got any?” It means becoming interested in why people invest in projects or programs, buildings or infrastructure and learning how they evaluate investment opportunities. Has the corporation or public entity you work with traditionally sought funding through the corporate or public bond markets; have they financed work through debt instruments? Have they had equity partners who want to have an ownership stake (and, therefore, a preferred rate of return) in their investment? What creative sources might you find that are interested in a participatory relationship, like funding energy performance enhancements in return for participation in the savings achieved? How about helping a corporate entity to find a REIT to purchase one or more of their excess facilities in order to generate cash that they need for other purposes? Or would a corporation or government entity like to sell one or more facilities and then lease them back, generating cash for other needed projects?
I haven’t even begun to scratch the surface of ideas and opportunities available to the architect or engineer who learns where the money comes from for their projects and becomes an active participant in this critical aspect of the work we do. There is a great deal to learn to become fluent in project financing – but that’s why those who broker the placement of that financing, putting “the-one-who-needs-the-money” together with “the-one-who-has-the-money,” get paid the BIG BUCKS!