Before approaching institutional capital, ask one question: Is the project actually funding-ready?
I regularly come across project owners looking for USD 20 million, USD 50 million, USD 100 million or more in project funding.
The first question should not always be:
“Who can fund my project?”
A more important question is:
“Is my project ready to be presented to a serious funding source?”
This distinction can save months of time.
As an independent project funding facilitator, my role is not to lend money or to promise funding.
My role is to help identify potentially suitable funding pathways for projects that are sufficiently developed, documented and capable of being presented to prospective capital providers.
What do serious funding sources normally want to see?
The exact requirements vary according to the transaction and funding structure, but a substantial project normally needs more than a business idea or a presentation.
Among the questions that need to be addressed are:
1. Who is the project sponsor?
The ownership structure, management experience, track record and ability of the sponsor to execute the project matter.
2. What exactly is being funded?
Land acquisition, construction, equipment, development costs, working capital, refinancing or expansion should be clearly identified.
3. Is the project commercially viable?
A credible feasibility study and financial model should demonstrate how the project is expected to generate revenues, service the financing and reach sustainable operations.
4. What is already in place?
Depending on the project, this may include land rights, licences, permits, technical studies, EPC arrangements, offtake arrangements, concessions, contracts, environmental approvals or other material project documentation.
5. What is the sponsor contributing?
A project seeking USD 50 million is not automatically investable simply because the total project cost is USD 50 million.
Capital structure matters.
Sponsor equity, debt, mezzanine, strategic investment, guarantees and other sources of capital may need to be considered together.
6. Can the project withstand due diligence?
Institutional capital providers will normally conduct their own legal, financial, technical, commercial and compliance assessments.
A project should therefore be prepared for scrutiny before the introduction is made.
One of the biggest mistakes I see
Some promoters begin with:
“I need $100 million. Do you have a funder?”
That is usually the wrong starting point.
A better starting point is:
“Here is the project, here is the sponsor, here is what has already been completed, here is the amount required, here is the proposed use of funds, and here is the project's financial and commercial basis.”
That changes the conversation from finding money to evaluating a financing opportunity.
No comments:
Post a Comment