Project financing as a method of creation of business

If you want o start business and don’t have enough money for it so here I want to tell you about another great way of business financing so I hope that this article will be very interesting for you. What the companies should do if for realization of the new project there is no enough financial means, and for attraction of a bank loan there is no adequate pledge? One of possible exits is project financing, but this product while is poorly extended, but it bears in itself high risks for banks.

Recently many companies implement scale projects on expansion of business, its modernization and reconstruction of the enterprises. Some of them for the purpose of a diversification of the business aspire to open the divisions working in industries new to firm.

Along with own means and investments of strategic investors for realization of all these projects business uses the resources involved from financial markets (IPO, release of debt obligations, bank loans). But to place shares or bonds at a stock exchange presume not all: it is rater long process and needs a lot of resources, not to mention that the company should have serious enough credit history or occupy a considerable market share in the segment.

As to a bank loan here all is standard enough and conservative: as repayment sources monetary flows from acting business are used, and as provision of borrowed funds assets of the enterprise available prior to the beginning of project implementation or the guarantor serve. But what to do if business is started from straight? It is improbable that the average bank will give financing exclusively under the enterprise business plan even if the borrower is rather solid company, for example, woodworking industry which has decided to be engaged in building. The risk of a non-return in this case will be rather great: the company never worked in developer industry, doesn’t possess corresponding experience and the personnel.

And still it is necessary to recognize that building commercial and a residential real estate is now rather profitable business. Therefore some banks which are having counted all pro’s and con’s, even more often agree to finance similar projects. This direction of risky lending rather new to the bank business is usual project financing.

Today the companies who are decided to be engaged in business can receive “longer” money — and under more low interests, than 2 - 3 years ago. Dynamics of growth of the given direction is rather big as it testifies to growing interest of the companies to this service — for last year the volume of a design portfolio has increased more than in 3 times.

The times when governments have been flooding people with all types of grants have passed. At least for a while. But that does not mean that one must get rid of the idea of getting small business grants.

Everything is doable with smart attitude; small business grants including.

Visit this blog for more helpful tips about grants, how to apply for grants, grant samples, ups and downs of the grants. This information will help you to get small business grants or any other grants in a more convenient way.

In case of availability of positive credit history to take the subsequent credit it will turn out much faster, in many banks and also will be provided soft terms and reduced interest rates. The packet of necessary documents depends on the required sum and accordingly more inquiries it is necessary to give. A standard kit of documents is documents of main activity (contracts with suppliers and buyers, the lease contract), constituent documents, and accounting records.

Often enough banks demand credit provision (pledge) is there can be an equipment or property (real estate, a car, the transport which is in the property of firm or belonging to the creditor). Also credit security can be the goods in turnover.

In most cases banks conduct pledge estimation independently. The pledge sum should cover the size of the credit and percent for all term. Thus the bank takes into consideration liquidity of pledge and a beret for a basis a maximum of 70 % of its assessment value more often.

Besides, conventional banks make the demand - to insure mortgage property. It is connected, including that according to the current legislation, in case of bankruptcy of firm situations when due to the law to bank assets can’t be collected from businessmen - proprietors of business. The property under pledge arrives on auction, and the bank has on it no preferential right. Experts advise not to be afraid of similar conditions, after all in the event that the borrower brings in time monthly payment he won’t have nay problems afterwards. Many banks give the loan to the client who leaves pledge in a form of, for example, machines, considering such the decision as more proof of gravity of the client.

Some banks have entered restrictions in issue of credits by the nature of activity and don’t give loans to the organizations which are engaged in extraction and realization of minerals, a gaming. Banks willingly credit production and service trade. But nevertheless there is one more circumstance is an unwillingness of banks to work with beginning businessmen. For credit reception the demand that the enterprise functioned not less than 6 month - year of work more often is needed, after all the most part of bankruptcies happens in the first year of work of firm.

But to receive start capital nevertheless is real. For example, in the event that the proprietor of the company is the skilled businessman, or having functioning at the moment of a capture of the credit or having experience of successful business dealing in the past. The decision for “beginners” the no-purpose consumer loan or the private loan can become optimum, it will be possible to address in bank later and to use small-scale business credit programs.

It is very reasonable that government, despite this recession is not abandoning to help small businesses. And small business grants can be a true helper today.

But, surely, you should understand that today the fight for small business grants as well as for other kinds of grants is more fierce. This is natural - more businesses need them. So before you start your fight for the small business grants, please make sure to check out this blog for more helpful tips about grant industry.

How to prepare for conversation with the venture investor

1. Test the idea in advance

The director for investments of fund of business angels AddVenture recommends before a meeting with the investor to talk with a great number of experts and potential customers, for example, at branch conferences. It is necessary to test the ideas. It is impossible, sitting in a tower from an ivory, to think up a wonderful product.

2. State project essence clearly and understandable

Before the investor would like to list through the multipage pages of business plan if it is available, it is necessary to explain an idea essence in briefly. At the same time to realize idea more accurately. Determination should be clear, short and clinging. Examples: “CatTube — YouTube about cats”. A’Insales is the system of construction of Internet shops in two cliques”. “Easyfinance.com is an on-line-control system of the personal finance — your personal financial officer”.

3. Speak particularly

From mere allegations like “we will earn on advertizing” investors for the last years have got a bit tired. Before convincing the investor in the potential of the idea, calculate “on fingers” on what it is possible particularly to earn. Some experts advise to prove figure analytics, similar projects (“We will have 5 million users, 1 % from them will purchase the expanded account for $10 a month, it will provide $50 000 revenues in a month”).

Don’t ignore world experience. It is necessary to tell that is already made: whether there is a prototype, preliminary arrangements with partners. Otherwise the presentation will look as project or the imagination torn off from the market. References to conversations with the guru in the given theme or heads of the big companies are important too.

4. Tell about a command

Any bright idea grows dim, if there is no command which is capable to embody it. Convince the investor that your command is like this. The managing director of fund notices that in a command should be not only specialists in one field, but also the person that understands component of business. So, if you open Internet shop, it is quite good to have in a command of the former manager of a retail network or supplier company. Necessarily refer to the previous experience of team members in business, in promotion of startups, in industry. He advises also to show that the command with a head has dived into the project, having put up the personal money, having left from the previous work, were spending nights at office …

5. Trust

The general director of fund DST the owner of few companies, advises: the businessman on interview to the investor in no event shouldn’t speak about an exit from business. Whether the investor will believe in your idea if you already start planning how you will throw this business?

It is very reasonable that government, despite this recession is not abandoning to assist small businesses. And small business grants can be a real helper today.

But, surely, you should understand that today the fight for small business grants as well as for other kinds of grants has become harsher. This is logical - more businesses need them. So before you start your fight for the small business grants, please make sure to visit this blog for more helpful tips about grant industry.

Small-scale business crediting

Today many banks assert that small-scale business crediting and it is one of their priority tasks. But in practice this statement is not implemented, after all to take the credit for a small firm is a very difficult task.

In a similar situation each party has arguments and explanations. Banks are confused with small scale business that makes difficult a real estimation of its fortune, besides; frequently there is no mortgage provision. Owners of small-scale business very often have no possibility to use credit programs of banks because of the overestimated interest rates at incommensurably short terms of repayment of a loan, and procedure of reception of the credit is difficult and long.

In addition, they don’t have start up capital or representatives of small-scale business don’t reflect a real financial situation in the reporting that considerably reduces probability of reception of money for replenishment of circulating assets or production modernization.

Unconditionally, present conditions of bank crediting of small-scale business are far from perfect. The authorities, understanding complexity of a situation, try to meet half-way business. In many regions government programs of crediting of small-scale business are already implemented. How much such support is effective the time can show. From the city budget the part of the expenses connected with reception of the credit in bank - in particular is compensated to businessmen, also is practiced partial subsidizing of the interest rate. Thus, small-scale business has possibility to receive means with smaller costs.

That fact isn’t called in question that first of all at registration of the credit the borrower pays attention to price parameters - the interest rate, term of repayment and the greatest possible credit amount, and also consideration term of application. The average rate in sphere of crediting of small-scale business constitutes 12-15 % in dollars.

Unconditionally, the rate size has regional features - percent on the country can differ on 1-3 points. However specialists notice that the tendency to equalization of credit rates in the market recently was planned. By the way, experts predict also general decrease in rates. So, according to Association of the banks, with 2002 for 2006 the mid-annual credit rate has decreased from 26,6 % to 16,2 %. The sum of crediting of small-scale business varies from 5 thousand to 1,5 million euro for the term from 6 months till 7 years.

Besides, it is necessary to consider about accompanying payments - the commissions which can increase monthly payment. Banks which specialize on crediting of small and average business can grant a delay of principal payment for the term from a month and about to one year, but don’t release from repayment of current percent. Before to take the credit, it is necessary to estimate the possibilities and problems with money return.

The days when governments have been showering people with all types of grants are over. At least for a while. But that does not imply that one should forget the idea of getting small business grants.

Everything is possible with wise approach; small business grants including.

Read this blog for more practical tips about grants, how to apply for grants, grant examples, ups and downs of the grants. This info will help you to get small business grants or any other grants faster.

As a rule, the successful companies working in sphere development or in an occupational sector are interested in project financing of the average size. In the development sphere there is a financing of building of new trading complexes or office centers. That is curious, production enterprises often start to build trading companies which effectively develop business and in this connection make the decision on opening of a partial or complete cycle of production.

If to speak about a branch accessory of consumers of project financing it is possible to note a considerable quantity of developers and the building organizations, the companies which are engaged in production of construction materials, the thermal power station companies, and also the companies working in sphere of entertainments.

Nevertheless the chief of department of project financing of Credit administration of Open Society doesn’t consider that project financing is limited to only listed industries. This product can be interesting to any company which doesn’t have adequate security for credit reception in bank on financing of the projects, but there is an attractive project (business idea) which can be interesting to consolidated financing of bank and investors.

Experts have found it difficult to estimate volume of the market of project financing. The data isn’t published today as properly banks don’t show real structure of the transaction on project financing. Today many banks which declare availability in their portfolio of contracts of project financing, actually credit investment programs of the shareholders, naming it project financing.

Actually the bank in this case acts as only passive intermediary; it simply restacks a measure of responsibility for projects implementation and return of means for the shareholders, leaving for itself function of operational servicing of credits. While volumes of the market of project financing aren’t so great, though positive dynamics of growth is available. Project financing occupies an order 10 — 15 % from a portfolio of corporate crediting according to the statistic.

Project financing is a packet deal which is performed with application of different standard credit products (investment and tied credits, leasing, guarantees, letters of credit and etc. The kit of “standard” products as a part of project financing is determined by each concrete case. Unlike the usual credit, in project financing there is no “uniform recipe” and standard procedure, in each separately taken case all individually. The final rate and term of granting of financing are determined depending on industry in which the project is implemented by a railroad train of participants and degree of responsibility of each of them, credit history of the company which has addressed for project financing, and many other factors.

Experts notice that now to receive project financing for long term became where easier, than earlier: the companies have longer credit history, a situation in many industries became much more predicted and investment “horizon” became longer.

It is very crucial that government, despite this recession is not abandoning to help small businesses. And small business grants can be a true helper right now.

But, of course, you should understand that today the fight for small business grants as well as for other types of grants has become harsher. This is logical - more businesses need them. So before you start your fight for the small business grants, please make sure to visit this blog for more helpful tips about grant industry.