A promising idea, a valuable piece of land or even a strong product is not always enough to attract capital. Businesses and project developers seeking financing must be able to convince investors that their opportunities can generate sustainable returns while managing the risks that could undermine those prospects.

It is a consideration that Gregory Samuels, senior vice-president and head of investment banking at Sygnus Capital Limited, highlighted during a recent presentation on what makes a business or project bankable, noting that even the term bankable may not fully capture what is required to attract investment.

Many projects require more than conventional bank financing, making it necessary for developers to consider whether their proposals have the structure, financial fundamentals and commercial prospects to attract different forms of capital, Samuels explained.

For greenfield projects, which begin without an established operating history or cash flow, getting the financing structure right is particularly important. Debt and equity serve different purposes, with equity allowing developers to meet early expenses, including feasibility studies and professional fees, while demonstrating that they have their own capital at risk. Grants or mezzanine financing may also be required, depending on the nature of the project.

Samuels pointed out that banks, however, are primarily concerned with a borrower’s ability to repay. Having valuable property or other assets to offer as collateral does not necessarily make a business attractive to lenders, who must be satisfied that it can generate sufficient cash flow to service its debt.

Equity investors have different considerations, including how they will earn a return and eventually recover their investment. This requires a credible exit strategy, whether through the sale of shares, a trade sale, an initial public offering or another transaction that allows investors to realise their capital.

The financing structure is only part of what determines whether an opportunity attracts investment. Samuels explained that developers must also have the necessary approvals, feasibility studies, financial models, technical assessments and commercial agreements in place before financiers are prepared to commit.

In renewable energy, for example, a project may require a power purchase agreement, engineering and construction contracts, insurance and performance bonds. These arrangements help determine how risks are shared and whether sufficient protection exists should the development encounter difficulties.

Investors will also examine the project’s location, infrastructure requirements and the experience of its technical partners, recognising that financial projections are only as credible as the arrangements supporting them.

Experts in finance, L O’Reilly Lewis (left), director of projects at the Caribbean Development Bank and Sebastian Rodriguez (right), principal executive for climate change adaptation and resilience, CAF, Development Bank of Latin America and the Caribbean are attuned to the points shared by Gregory Samuels, Senior Vice president and head of investment banking, Sygnus Capital Limited, at the Climate Smart Finance Forum in Barbados earlier this year. 

The quality of management can carry similar weight. A business with an attractive concept may struggle to secure capital if those responsible for executing it have limited experience, while a credible management team with an established track record can strengthen confidence in the proposed venture.

Even then, businesses must demonstrate that their financial assumptions can withstand changes in market conditions, Samuels said. Demand may weaken, operating costs can rise and technologies may become obsolete, leaving investors to consider how a project would perform if its expected returns come under pressure.

These concerns are particularly relevant in the Caribbean, where new developments frequently lack an established revenue stream and projects involving unfamiliar technologies must demonstrate that they can operate commercially within the regional market.

Still, the challenges have not diminished the investment opportunities available across the region. Tourism, hospitality, climate-smart agriculture, renewable energy, manufacturing, distribution and logistics remain areas of interest, with food and energy security presenting further opportunities for development.

The Sygnus executive also pointed out that sustainability is assuming greater importance in financing decisions, as development banks, multilateral institutions and other capital providers pay closer attention to environmental risks and the ability of businesses to withstand future shocks. These considerations increasingly extend beyond explicitly climate-related projects to the broader assessment of long-term commercial viability.

At the same time, changes in the investment landscape are creating opportunities for businesses to look beyond traditional bank lending. Equity, private credit and blended finance can provide alternative sources of capital, particularly where projects have financing requirements that conventional lenders may be unwilling or unable to accommodate.

Across smaller Caribbean projects, arrangements that combine investment opportunities may also help attract international capital that would otherwise be difficult to secure individually.

While access to different financing instruments can improve a project’s prospects, Samuel cautioned that investors still need assurance that its commercial assumptions are realistic, its risks are properly managed and the people responsible for delivery have the necessary expertise.