Let’s say a developer needs funding, when they apply for project finance, the lender might put together a structured finance solution to suit the developer’s project requirements. But what does structured finance mean and how do they do it?
What is Structured Finance
The lender will look at the development project to determine what it’s requirements are and then structure a finance model according to the projects needs. If the borrower has been refused funding for whatever reason, this might be the best route to go down. So in other words, structured finance not only benefits the borrower but also protects the funder.
Today there are many ways to get seed funding for a business. The old traditional way was to go and ask the bank manager for a business loan. As there are problems in the economy and banks are being a lot more frugal with commercial loans, people need to look elsewhere to get the right loan to suit their business requirements.
Every project is different so it is not possible to compile an exhaustive list of project funding risk or to rank them in order of priority. What is a major funding risk for one project may be quite minor for another. One can discuss the risks that are common to most projects and possible avenues for minimizing them. However, it is helpful to categorize the risks according to the phases of the project within which they may arise: (1) the design and construction phase; (2) the operation phase; or (3) include both phases. It is useful to divide the project in this way when looking at project funding risks because the nature and the allocation of risks usually change during and between constructions.
Large Project Finance
There’s different options for project principals to raise capital for their project. Corporations can apply for large project finance from institutional investors, venture capital and boutique banks. These financial bodies can utilise bank instruments and private placement platforms to build up initial funding to start cash flow and progress with funding activities.
Since Brexit (UK exit from the EU) the worlds markets are looking very uncertain. The Pound is weak against the Dollar and Euro thus creating instability and a knock on effect to other EU countries. Staying afloat is the first thing that every CEO worries about.
If entrepreneurs find it hard to receive grants or corporate loans from the country they reside in, then they might look further afield. Overseas financial institutions provide an array of funding options such as venture capital and other private funding and so on.
Unless you go through the big banks, international project finance can be hard to come by. This is proven when doing a search on the internet for finance in may sectors. The biggest area of funding to date is in the technology sector.
International Project Finance
Our funders help to fund shovel ready businesses that require at least 70%+ project finance in multi sector environments such as infrastructure and green energy. Most “mega projects” rely on sophisticated financial modeling and financial structures. Structured finance models based on either equity, debt or a hybrid of both. Debt structured finance is more commonly used for startups as they have little to no equity and carry a lot of risk. It is more common to see private investors flock towards more established corporations with revenue on balance sheets and collateral on their assets/liabilities spreadsheet. One way of receiving funding for your project abroad is by cashing in an SBLC.
Bank Instruments For International Trade
One of the biggest issues any business has when trading on a global scale is the issue of financial security. The business needs some comfort knowing that that the Buyer will pay for goods received and on time. SBLC’s can also be used to win contracts and tenders for development projects. For example your company may put in a bid for a tender for the construction of a hospital and by having an SBLC in place this could give the government the security they require to demonstrate that your company has the financial wherewithal to be able to perform and construct the hospital. This is just one example on how your SBLC can be used for project finance. Another way is that you could open up a line of credit with your bank and this is backed by a cash backed SBLC which your bank may require.
Bank Instrument Providers
Using a bank instrument is one example of how you can secure payment should the Buyer not pay on time or at all. Bank instruments can be hard to come by, in fact there are a handful of genuine Providers of “fresh cut instruments“. There are many reasons why people choose to lease a bank instrument from a credible source. Reasons might include
- To fund a project
- Provide security for international trade
- To use other sources of collateral at a fraction of the overall cost
- To use bank instruments to grow and expand a company
Bank instrument Providers can be large organisations such as hedge funds and pension funds and often work to tight timelines. It is impossible to contact these organisations directly so knowing their trusted sources will open many doors for you.
Please note; Prestige Capital Partners are connected to Providers of fresh cut instruments and Monetizers to liquidate bank instruments.
Project Finance Terms
Typically, the duration for project finance is long-term in nature. The process involves forecasting what the anticipated cash flow from a project will be, and extending debt and equity financing based on those projections. Funding international projects might be extended by bilaterally and multilaterally using a mixture of financial institutions and global investment banks. These institutions have an interest in profit sharing of a growing economy’s expansion efforts. It might also derive from a specialty-financing firm that focuses exclusively on supporting international endeavors.
We can source the arrangement for specific project finance (debt or/and equity funding). Our funders offer can offer flexibility through recourse loans that are collateralized by a project’s assets and cash flows. This could finance as much as 90% of the project’s total cost over a term of five to 15 years.
We are mandated to source funding for many worldwide projects. We realize that there are financiers who have specific geographical locations where they fund. If the project is on the embargo list, we are unable to source finance.
Funding Businesses Worldwide
We deal with global funders who have different appetites for different geographies and industry sectors. If you need help with business growth and expansion, we are able to collateralise and monetize stocks, real estate and gemstone portfolios. As well, we are aligned with a number of Providers of cash backed SBLC’s and Monetizers who can assist companies looking to either putting the instrument into trade platform or straight forward trade transactions.