Helping a mid-sized construction contracting company scale growth 

Project Horizon is an anonymized case study of a mid-sized project contracting firm in the UAE. This contractor frequently bids on infrastructure and construction projects and has completed work for major clients such as ADNOC and the National Marine Dredging Company. 

With a solid track record in its niche, the firm was eager to participate in larger tenders and scale up its operations. However, like many contractors, it faced strict requirements from clients to provide performance guarantees (a type of bank guarantee) for each new project awarded. A performance guarantee assures the client that the contractor will fulfill the contract; if not, the client can claim funds from the guarantee. Typically, banks issue these guarantees on behalf of contractors, but require significant cash collateral to do so. 

Challenges 

Project Horizon was “hyper-banked,” meaning it had already tapped into traditional bank credit to its limit. For any new performance guarantee, the banks demanded a 100% cash margin – essentially the firm had to deposit the full value of the guarantee in cash or as a fixed deposit with the bank. 

In practical terms, if the contractor needed a performance guarantee of AED 1 million for a project, the bank would freeze AED 1 million of the contractor’s cash as collateral. This practice left the contractor’s funds tied up and unusable, defeating the purpose of trying to take on new projects. With all its cash locked as security for guarantees, the firm had no capital left to actually execute the projects or pursue multiple bids simultaneously. 

The requirement of full cash collateral was blocking its growth, as it could not bid on more projects without freeing up additional capital (which it didn’t have due to existing guarantees). Traditional banks were unwilling to extend additional credit or reduce the collateral requirement, given the firm’s already leveraged position. This rigid approach meant missed opportunities – the contractor had to pass on several tender invitations because it simply couldn’t secure the necessary performance bonds without crippling its cash flow. 

Zelo's Solution 

Zelo crafted a two-pronged solution leveraging its innovative financing model and partnerships. First, through its partnership with First Abu Dhabi Bank (FAB), Zelo facilitated the issuance of performance bank guarantees with only a 30% cash margin (instead of the traditional 100%). For example, if Project Horizon needed a AED 1 million guarantee, it only had to place AED 300,000 as collateral, not AED 1 million. By replacing the bulk of the cash margin with Zelo’s guarantee arrangement, the contractor’s tied-up capital was substantially reduced. 

This freed up 70% of the cash that would have been encumbered, allowing the firm to deploy that money elsewhere in the business. Zelo essentially underwrote the risk for the remaining

portion via its partnership with FAB, leveraging its credibility and balance sheet to back the contractor. 

Secondly, Zelo extended its invoice financing product to Project Horizon for ongoing projects. Much like in Project Atlas, this meant that once the contractor completed milestones and issued invoices to clients (like ADNOC), Zelo would finance those receivables, giving the contractor immediate access to funds rather than waiting through long payment cycles. This ensured that even as the firm took on more projects, cash flow from progress payments remained fluid. 

The combination of these solutions – lower collateral for guarantees and accelerated invoice payments – created a powerful synergy. It addressed both the upfront need for bidding on new projects and the ongoing need for working capital during project execution. Importantly, Zelo’s approach was far more flexible than traditional lending: instead of viewing the contractor as over-leveraged (“hyper-banked”) and turning it away, Zelo found a way to support growth, mitigating risk by focusing on the underlying contract quality and client creditworthiness. 

Results and Impact 

With the performance guarantee hurdle lowered, Project Horizon quickly capitalized on its new capacity to bid. In the six months after engaging Zelo, the firm bid on and won 5 new projects – opportunities it would have previously been forced to skip. 

Each new project came with a performance guarantee supported through Zelo’s 30% cash margin structure, and the firm was able to start work on them without draining its finances. Over the next 24 months, the contractor experienced a remarkable trajectory: it doubled its revenue. 

This growth was directly tied to the additional projects made possible by Zelo’s financing support. Not only did revenue increase, but the diversification across multiple simultaneous projects also strengthened the firm’s market position and credibility with large clients. 

The capital that was freed from being tied up in bank guarantees was now put to productive use. The contractor invested in scaling its operations to meet the demands of its larger project portfolio. In a short span, the firm hired tens of skilled workers and multiple engineers, significantly bolstering its technical workforce. This not only improved the firm’s ability to deliver quality work on schedule but also enhanced its capability to take on complex projects. The company also leased an additional office and yard space, anticipating more projects and needing more room for project management and equipment. 

With better cash flow management through Zelo’s invoice financing, the firm could pay subcontractors and suppliers on time, maintain equipment, and manage project expenses without financial strain. All these moves led to roughly a 40% increase in project capacity – the firm could handle nearly half as many projects more than before. This kind of expansion would have been unthinkable when its capital was locked in bank deposits.

Beyond the raw numbers, Zelo’s support improved the contractor’s competitive edge. It could bid more aggressively (knowing the guarantee requirement was manageable), and it could execute projects efficiently thanks to steady cash flow. Clients noticed the firm’s increased capacity and reliability. In an industry where cash-strapped contractors often falter, Project Horizon now stood out for its financial stability and performance. 

This led to more invitations to tender, creating a positive feedback loop of opportunity. Moreover, by using invoice financing to maintain liquidity, the firm avoided taking on expensive short-term debt or delaying payments – practices that can tarnish reputation. Instead, it built a virtuous cycle of timely project delivery and solid financial management. 

Key Takeaways: 

- Flexible Guarantees Unlocked Growth: Traditional lenders required a 100% cash margin for performance guarantees, tying up funds the contractor needed to grow. Zelo’s innovative partnership solution lowered the cash margin to 30%, freeing 70% of the capital that would have been frozen. By substantially reducing tied-up capital for guarantees, Zelo enabled the firm to bid on many more projects, directly fueling a doubling of revenue. 

- Synergy of Guarantees and Invoice Financing: Zelo’s holistic approach addressed both upfront and ongoing capital needs. The performance guarantees made new projects attainable, while invoice financing kept those projects running smoothly by accelerating cash inflows. This one-two punch of bid support and working capital management allowed Project Horizon to execute an expansion that would have otherwise choked on cash constraints. 

- Operational Scale and Job Creation: The financial freedom provided by Zelo translated into tangible growth – new hires, more engineers, and expanded facilities. The firm’s capacity grew by 40%, and it created dozens of jobs, demonstrating how innovative financing doesn’t just help one company but also drives broader economic activity (e.g., job creation, subcontractor opportunities).