Friday, March 27, 2015

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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