Project financing is about procuring the necessary financial sources in order to realize a project. An essential characteristic is that it is temporally bounded, it is about covering the costs of a commission during a specified time or at least a specific outcome. If the result of the project is a new business organization or new enterprise then the financing will change since now the goal is managing a sustainable enterprise.
If the goal is a project within an
enterprise then allocating the financial sources of the enterprise
appropriately will solve the financing of the project. It is possible to
conduct a project through an outside contractor or in cooperation with a
partner so multiple sources can be used.
Through the risk analysis of the project financing it is recommended
to create a business plan similar to an enterprise from which the expected profitability
can be calculated.
Banks offer different credit schemes to
project financing in which the banks are concerned primarily with the
profitability of the project not the parent company. These loans usually target
major investments since it's more efficient to execute smaller projects inside
the company because of the fixed costs (e.g.: administration, accounting, etc.)
Tags: project, finance, loan, commission
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Dr.
Tibor Palánkai
economist,
university professor, academic
(Hungary,
March 1st, 1938) Award winning Hungarian economist, university professor,
member of the Hungarian Science Academy. Renowned researcher of European
integration and international division of labour. Deputy rector of Karl Marx
Econonim University between 1977 and 1983, rector of Budapest Economic
University (successor of Karl Marx University) between 1997 and 2000)
Further information: http://en.wikipedia.org/wiki/Tibor_Pal%C3%A1nkai