Special Purpose Vehicles

Basic Principle of SPV

A financing method that allows you to fund specific projects without needing to finance the entire corporation. It’s designed to protect the interests of current shareholders by avoiding dilution of their ownership. Plus, it’s structured in a way that doesn’t affect the corporation’s debt ratios or agreements with lenders. This type of financing is particularly useful for projects that require significant upfront investments, like buying property or expensive equipment. Essentially, it involves setting up a separate entity (SPV) to own these assets and then leasing them back to the corporation.

SPV is paid a lease by the Company for use of real estate or equipment

Lease is usually a percentage of revenues or earnings generate by the project

Company has the right to purchase the equipment back from SPV after a certain period of time (can be structured in either cash or stock)

SPV gets all of the amortization/depreciation and other tax incentives or rebates from the asset. Works best if located in an economic development or opportunity zone such that there is accelerated amortization/depreciation and other tax incentives

SPV investor is looking for 15-20% annualized return (between lease payments, amortization and incentives) depending on perceived risk

Unveiling the Power of Special Purpose Vehicles

Our Special Purpose Vehicles (SPVs) provide a streamlined approach to financing projects without diluting shareholder equity. Operating off-balance sheet, SPVs ensure minimal impact on financial ratios while offering strategic flexibility for capital allocation. From real estate ventures to capital-intensive projects, our SPVs empower businesses to pursue growth opportunities confidently.

Example: Vivakor (NASDAQ: VIVK)

Vivakor has proprietary technology for remediating oil from sand and leaves oil intact to be resold as recycled/reclaimed oil
Technology costs approximately $7 million to build and deployed
Raised $8 million in an SPV to build, deploy and pay for operations of the technology
Vivakor leases and operates the machinery owned by SPV and pays a 10% of revenues derived from the specific machinery. Annual payouts are capped at 12% of total invested capital ($960,000) and a guaranteed minimum payment of 8% of total capital ($640,000)
Vivakor has right to buy machine from SPV for fair market value up to or after 5 years and can buy it for cash or stock
SPV received all of the amortization of machinery and since machinery is in an Opportunity Zone, amortization is accelerated over first 12 months.

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