Monday, April 9, 2018

Secrets To Get Your Project Funded

When a project owner applies for funding, it may come as a surprise that the process may not be as simple as going to a bank to apply for a loan.

Most often than not, you need to submit:
  • An executive summary
  • Business plan
  • Financials
  • Permits/licenses/Compliance
  • Patents
  • Agreements/PPA's

Secrets To Get Your Project Funded

When applying with a bank it could take up to a year to review, analyse and access the project in it's entirety before a decision is given by the bank whether or not funding has been granted? Other types of funders can take less time. In general, it takes a minimum of 3 months to have a project funded via conventional means. The challenges we are faced with are where projects tend to lack the requirements as set out by banks and conventional project funders. Most projects lack the following:

1)      Lack of cash equity ranging from 5 to 30%
2)      Lack of liquid, callable assets
3)      Do not have any existing turnover/revenue flows to service debt
4)      Normally have no assets whatsoever
5)      Nothing to demonstrate on balance sheet
6)      Lack of seed capital
7)      Most projects require 100% funding and do not have the resources to contribute any funds of their own for associated costs as set out by the funder
8)      Funders nowadays are very picky as to who they fund and have the luxury of being able to cherry pick projects they wish to fund. They will therefore steer towards projects which have the least perceived risk and/or most collateral and assets which the funder will have assigned to them to back up the loan
9)      Not a lot of funders provide 'off balance sheet' lending

Furthermore, if a project owner is seeking 100% funding, they may require equity funders but there is still an overall cost. It could mean that in future, the equity funder own a large protion of the business and have more control of it than the project owner would like. (Please read this article about fees v cost.)

Having been in this industry for a number of years, we have learned the hard way that there is no such thing as 100% funding without the project having to contribute some money towards their funding requirements.

No comments:

Post a Comment