Below you can find the overall summary of the Project Financing principles, widely used in developed countries, which now are gaining more and more recognition in the developing countries and emerging economies. The Project Financing instruments are available to any entrepreneur who owns a descent project, which meets the general requirements described below.
To move the Project forward you need money. It doesn’t matter would you like to start a new business or to upscale the existed one. When the Project Owner seeks for an external financing in the amount of tens million dollars the choices are usually limited to the Banking (Commercial) or the Project Financing.
Let’s take a look at the main features of the both types of financing mentioned above.
1. Banking or Commercial Financing.
We start dealing with banks being teenagers; it is common and convenient for us to recall the bank when we think of money. That’s why the first call is for the bank, can we get funds there, at what conditions and how much it is costing us? If you already tried it, you know that
First, when depositing funds on to the bank account you increase the cost of borrowing, not many people think of it. Secondly – there too many conditions which really are the limitations. Those limitations are understandable – the bank needs to make some precautions in order to secure its investments; in case of the Project failure the bank must have something to recover the loss. Therefore, with the banking financing the Project Owner is left obligated to pay off the loan and interest on it, plus with the realities of the not successful sometimes Project implementation. The bank steps aside waiting for the debt repayment, in the event of the Project failure, bank is not able to help the owner to safe it, as the bank does not have management capabilities in running the Project and don’t want to invest more in the perished deal. The bank sells all pledged by the Client, the Client loses everything, the Project dies.
2. Project Financing.
The Financier also has to ensure security on an investment, this is a law. Yet, in case of the Project Financing, the only guarantee of the funds return for the Financier is a cash flow, generated by the Project and outlined in the Project Business Plan. You do not need to pay the loan and the interest back, just to let the Financier stay in the Project and share with him the income. The Project ownership is also shared between the Financier and the Sponsor, making thus the Financier to be interested directly and responsible for the Project at its any stage. In case the Project goes sideway the Financier will always steps in to provide any financial or expert assistance with is possible. At the same time the Financier doesn’t have a claim on the managerial position in the Project, leaving this essential duties with the Sponsor.
UniGlobe Capital Trust Inc., a Private Delaware Corporation, is a global provider of Project Finance and Risk Mitigation services. In other words, our Clients, who become further on our Partners, obtain not only the funds necessary for their Project, but a Project security in the form of the thorough Project risks identification, evaluation and mitigation. If the Project is located on the territory of the developing countries and emerging economies, the Owner is advised to transfer the Project Ownership to the developed country for the best Project results and the optimal Owner’s rights protection due to the existed here well-developed legislation.
Now you can easily see that the flexible Project Financing is designed to satisfy the Project needs due to its advantages over the rigid form of the Banking financing:
By its organizational structure, UniGlobe is a Trust company. Trust, under the law, is responsible for a safe and profitable placement of its clients and partners funds in the perspective Projects. Company possess working experience in the field of project financing for more than 25 years, the relationship with financial institutions, industrial and financial groups are well established around the world.
The applicant approaches UniGlobe with a financing request. There following conditions apply:
* If the owner is not in position to finance the Development stage personally, or cannot find the sponsor for covering this stage cost, UniGlobe’s affiliated company can step in and procure the Project Developer/Sponsor with appropriate work experience in the industry and desire to participate in the Project, delivering his skills and experience and necessary Short-term financing.
When registering his Application for Financing through our website, the Project Owner supposed to attach as well some additional information such as:
Only the Project Owner can apply for the Project financing. Below are some examples of how the Applicant may be identifies as the Project Owner:
UniGlobe reviews the documents and conduct the preliminary evaluation of the Project chances to be financed. In case of the positive result, the first interview with the Applicant is taking place. When both Parties came to common understanding of the further steps, Applicant will submit the formal Application for the Project Financing according to the special instruction provided to him.
The second round of negotiation starts discussing the Project Ownership share and other important for both Parties details. On reaching the principle agreement on the Project Financing key points, the UniGlobe drafts and presents to the Applicant the detailed financing contract called the Term Sheet, which identifies the Project, structure of the future work and the mutual obligations and responsibilities of the parties.
As mentioned above, UniGlobe, a Trust company, being responsible for a safe and profitable placement of its clients and partners funds, has to get the Third Party qualified opinion on the viability and profitability of the Project. UniGlobe hires for this reason a special company to run the Fiduciary Independent Review (“FIR”). Such company, gaining the FIR Manager status, hires the Experts to identify and explore the risks in the Management, Economy and Technology aspects of the Project, and to provide both UniGlobe and the Project Owner with the recommendations of those risks mitigation. The FIR is conducted by the supervision of the Steering Committee, which includes representatives from the FIR Manager, UniGlobe and the Project Owner. The Project Owner has to pay his mandatory part of the FIR expenses against incoming invoices, no advance payment is necessary.
We strongly encourage any Candidate for the Project Financing to weight seriously the Project chances of passing successfully the FIR in order to prevent both Parties – The UniGlobe and the Project Owner from unproductive loss of time and money. The negative Project FIR Report would benefit nobody.
The positive Project FIR Report allows UniGlobe to make the decision on the Project long-term financing. Later UniGlobe presents the same positive report to the insurance company in order to insure at UniGlobe expenses the total amount of the financing provided.
The Project financing is arranged through the newly set Holding company with Project ownership shared between Parties according to the Term Sheet conditions. The financing starts based on the Financial Agreement signed by Parties on the level of the Holding.
This concludes the brief description of the Project Financing procedure outlined in general terms. Each Project has its own specifics, which reflects upon the financing procedure in every particular case.
Let us review the summary of the main objectives for the Project Owner to qualify for the long-term Project Financing: