Project Financing Payments.

In the world of project financing, many entrepreneurs refuse to pay “upfront fees” for their project. When you apply for debt financing, the lender may need to put in place a financial structure that allows you to start a project and also determine your ability to repay the loan. While it’s true that you may not have to pay a fee upfront, there are often associated costs involved.

Rates Cost of V:

A fee is when you are asked to pay for the services of the providers, either by arranging the finance package through the broker or a fee charged by the financer itself. This fee is normally collected at the end of the financing procedure.

A cost is something that cannot be avoided. The money goes to real events, such as buying a bank instrument in your name, locking funds within a hedge fund, raising money from private equity. All of this incurs costs.

What is included in the cost?

The costs can include a variety of things, such as obtaining guarantees. Let’s say you have a project that is NOT guaranteed and still not generating any income. Funders/lenders generally protect borrowed money by insuring it against some form of collateral. As a project that is in its early stages, they will not have any guarantees. It is quite common for funders to have to go and obtain external guarantees by purchasing instruments to guarantee the project.

Often this involves another corporate entity pledging its assets against the instrument for 1 year and 1 day. You now have two parties at risk, the corporation pledging its assets against the security and the funder buying the security to lend against it; this incurs costs. Other costs may include 1) due diligence, 2) paying for flights for face-to-face meetings, 3) locking up money within a hedge fund, 4) securing funds from private equity investors, all of which incur very real costs. It does not mean that all companies have these costs.

Payments and Commission

Getting financing for a project can be quite cutthroat. Please read their agreements and terms carefully when applying with brokers or lenders as some companies have been known to charge ridiculous registration fees, down payments, Skype call fees and an exit fee. All of this may be legitimate, however, there are those funders who are only looking to collect the fees and very rarely get funding results. I’ve heard some companies are charging 20K just for the registration fee and exit fees can be expensive, making it difficult for companies to go elsewhere if they haven’t received financing within 12 months.