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.
Corporate Balance Sheet Protection
In today’s volatile market, companies are looking towards protecting their assets on their balance sheet. Funders enable companies to not only protect their assets but also to realize a return on latent/non-performing assets. There are companies which facilitate this by providing vehicles in which a company can cede/assign collateral into a fund which offers a return on the value of funds assigned.
As well, for companies looking to enhance their balance sheet for the purpose of borrowing, there is also balance sheet enhancements whereby one can obtain via specialized firms collateral from other firms. These firms will ‘lease’ out their assets to enhance corporate balance sheet so as to demonstrate enough collateral to show to funders who in turn would consider the assets for collateral based lending.
Large Project Finance
Large international projects may not be readily funded by traditional commercial channels. Large projects can be financed in these ways:
- Debt financing
- Equity financing
- 70% project financing
- Growth and expansion capital financing
Please note that most of our funders do 70%-90% funding. Although we aim to help projects get 100% funding, this is rare!. We do urge project owners to find sponsors/investors.
Types of Debt Funding
There are many ways a business can use debt to finance their operation. These debts can be divided into the following categories.
- Secured Debt -A debt is considered secured if creditors have recourse to the asset of the company on a proprietary basis or in case of general claims against the company. secured debt is divided into the long term and the short term debt.
- Unsecured Debt – In unsecured debt the creditors do not have recourse to the assets of the borrower to satisfy their claim. This makes unsecured debt very risky to the creditors. As a result of this risk, the unsecured debt normally attract high interest.
Debt funding is effectively debt finance, where high risk and little or no security available is compensated by a small amount of equity. This is often referred to as an “equity kicker”. Debt financing is generally provided on a non-recourse basis.
100% debt funding (very rare) can often be structured backed by an instrument. One such instrument is called a bank guarantee. This is used to lessen the funders risk in the event of non repayment of the loan. Be aware that funders may ask for payments to build the funding structure. This is a minimal cost to the loan amount that you require. Projects are usually charged in USD which will be stated on the indicative terms LSA.
You can raise growth and expansion capital by going down the series A and B funding route. (Although we don’t offer this option or M&A’s, we aren’t saying that we can’t do it.) There is another way of fundraising and that is to make use of our investment options to give your company added support and protection from market risk.
If you want more control over your project, you too can apply for a bank instrument to fund your project. If you wish to go down this route there are a couple of things you should know. More information about bank instruments can be found here and here. (Both options opens a new window).
Raising Capital For Large Projects
In M&A’s (Mergers and Acquisitions) debt finance has been an important route used by businesses to finance their projects. Debt financing is the process where businesses raise working capital or capital expenditure by selling bonds, bills to institutions or investors. The investors become creditors and receive a promise note for payment of the principal and interest at an agreed rate and time.
However it must be noted that all of the above mentioned options can be both time consuming and overwhelming. Our job is to do all the ‘leg work’ for you and by utilizing our funding partners we can overcome the obstacles and cut out the laborious work involved in order to reach successful funding for your project. There are some advantages of debt funding such as utilisation of resources and having a tax advantage to businesses as interest is deductible for income tax purposes.