HOW NatLUST FINANCING WORKS

NatLUST provides liquidity using a simple financing technique. Rather than lending money to RP's, NatLUST simply purchases the RP’s approved claims using a “two-step” payment process, paying either the RP or their consultant as directed..

Step One: When a particular phase of a project is completed and the claim reimbursement application prepared, the RP assigns (sells) their claim to NatLUST concurrently with the claim being submitted to the state environmental agency for processing & approval. RP’s will indicate on the assignment form whether they are electing to use the Direct Pay feature.

Immediately upon the claim being approved by the state agency, NatLUST will issue an “Initial” payment, typically a large percentage of the amount approved (ex. 92%+ of the amount approved would be typical for state programs such as Virginia, North Carolina, Tennessee, Connecticut, Illinois, and Kentucky, where the fund's payment delay is 18 months or less).

Step Two: When the claim is eventually reimbursed, NatLUST will receive the reimbursement directly from the LUST fund, at which point NatLUST will remit the 8% balance owed, less the accrued carrying costs, in the form of a second, “Residual” payment.

WHY THE TWO-STEP PAYMENT PROCESS?

First, because we won’t know precisely how long it will take a LUST fund to reimburse a particular claim (or how short term interest rates may fluctuate), the two–step payment allows NatLUST to retain a small percentage of the approved claim as “excess collateral” from which the accrued carrying costs will be deducted. This allows NatLUST’s credit providers to focus on the credit risk of the LUST fund and eliminates the need to look to the RP as a source of repayment, thereby making the program simple and inexpensive to manage.

The two-step payment method is more desirable for a nonprofit program than a single payment, where NatLUST would have to guess at its future carrying costs. With a single payment, likely what would happen is NatLUST would either make a windfall profit (or lose money), neither of which would be a desirable outcome. With the two-step payment model, only the exact carrying costs are deducted, with any excess collateral returned to the RP or their consultant.

NatLUST FINANCING IS NOT DEBT

Because NatLUST is buying an asset and not technically lending money, one advantage is that the financing is not debt to the RP, their environmental consultant, the state LUST fund or its taxpayers. The only party going into debt is NatLUST.

For other questions, visit the FAQ page by clicking here. For a diagram of cash flows, click here.