As highlighted by industry expert Rodrigo Balassiano, in today’s climate of economic uncertainty and limited access to capital, structured funds and performance-based contracts have emerged as innovative alternatives to traditional credit. These mechanisms enable business investments and expansion through more flexible financial structures that are tied to actual operational performance. By combining investor resources with predefined performance metrics, structured funds and performance-based contracts become strategic tools for companies seeking growth without relying solely on banks.
Discover how structured funds and performance-based contracts can unlock new growth opportunities for your business, offering flexibility and outcomes aligned with real market conditions.
How Do Structured Funds and Performance-Based Contracts Work?
Structured funds and performance-based contracts operate on a different logic from conventional financing. Instead of requiring traditional collateral or fixed payments, they link investor returns to the performance of specific, pre-agreed indicators. This reduces the financial pressure on capital recipients and fosters a healthier alignment of interests between all parties involved.
According to Rodrigo Balassiano, these contracts can be applied across various sectors—including infrastructure, energy, healthcare, and technology—allowing medium- and long-term projects to be structured with greater security and predictability. The funds themselves are composed of various asset types, such as credit rights or receivables, which enhances customization and risk mitigation.
What Are the Benefits Compared to Traditional Credit?
One of the main advantages of structured funds and performance-based contracts is the flexibility they offer in financing conditions. Unlike traditional bank loans, which often demand strict guarantees and short repayment periods, these structures adapt to the realities of the business, taking into account its operational cycle and growth potential. This is particularly important for innovative or expanding companies that may not yet have substantial physical assets to offer as collateral.
As Rodrigo Balassiano explains, risk-sharing is another significant benefit. Because investor returns are directly linked to the project’s performance, there is a mutual incentive to meet targets. This alignment promotes more efficient governance, greater transparency in outcomes, and a more collaborative partnership between investors and entrepreneurs.
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Even companies that already have access to bank credit may find this model attractive. Diversifying capital sources strengthens financial planning and reduces dependency on a single funding channel, making the business more resilient during periods of economic instability.
What Precautions Should Be Taken When Choosing This Alternative?
Despite its advantages, structured funds and performance-based contracts require careful planning during the structuring phase. It is essential to establish clear, realistic, and auditable performance indicators to avoid interpretive disputes over the course of the contract. Poorly designed metrics can undermine the effectiveness of the model and create conflicts between stakeholders.
Another critical factor is the legal soundness of the operation. Given the complexity of these structures, specialized legal advice is crucial to ensure regulatory compliance, contractual security, and alignment with the Brazilian Securities and Exchange Commission (CVM) guidelines. This is important for both investors and capital recipients, as both depend on legal predictability and protection of their interests.
Finally, Rodrigo Balassiano emphasizes the importance of assessing the reputation and technical expertise of the managers involved. Choosing experienced partners committed to strong governance is key to a successful operation. This includes everything from asset origination to ongoing performance monitoring, ensuring that financial and operational goals are effectively met.
Author: Bergezin Vuc
