This is not an either or situation. It’s about finding the right mix and applying appropriate funding as needed. Borrowing for land and buildings is common and relatively easy because the land and structures can be used to secure the loans.
Not having to repay the PPO proceeds is insufficient justification for this action. If they don’t have a sound business plan and reasonable ROI for this facility they should not commit $4M of borrowed money or PPO proceeds. If they do have a reasonable business plan then they should at least weigh the options. The notion that LW doesn’t like debt should make people wonder why? My reaction is that he is concerned about repayment, which could indicate he is not fully confident in the business plan or their ability to meet it. Sounds like he may have issues with commitment.
I don't think that CYGX needs revenue to get a construction loan combined with a loan on the real property. They do need a buisiness plan that will show how they expect to pay the note. But how a bank perceives the ability of CYGX to ultimately pay the note, and what the bank thinks that it could get out of the property in the event of a forclosure, will determine what percentage of the expected post construction appraisal value the bank will loan and on what terms. I would be pleasantly suprised if CYGX could get anything better than 50-60% of the expected value.
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