Project finance is a type of financing where the lender or investor relies on future cash flow to either service the loan or deliver a return on investment. This method of financing runs counter to the traditional financing format where a borrower pledges property or other form of collateral to secure a loan. Project financing takes place across a wide range of business sectors including:
- Oil and Gas
- Traditional and Alternative Energy
Raising significant amounts of capital based on anticipated cash flow can be tremendously advantageous to the borrower, but it places an increased level of risk on lenders/investors. This risk is often mitigated by:
- Combining project financing with traditional collateral-based financing as well as guaranteed loans.
- Setting financing terms to compensate for perceived and calculated risks. These terms can include higher interest rates, demands for an increased equity share, or a combination of the two.
Much of what determines these terms is directly related to the degree of professionalism exhibited in the presentation of the project to potential lenders/investors. This professionalism can be displayed in many ways, including:
- In depth analysis of the project to be financed with realistic timelines on benchmarks to completion, cash flow rates, and returns to lenders/investors
- Granulated contingency plans
- Detailed description of management’s experience both in the industry and with previous projects
Dmitrij Harder and Solvo Group can provide the expert assistance required to present your project in the most professional manner possible. Solvo’s expertise can not only help get your project financed, it can get you competitive terms that can add to your profitability.