Financing rules and regulationsLyrics
Project funding is not science. It is a regulated business played by serious rules. And if you don't know the rules you have only two options. Learn the rules, or accept the fact that your project will never be funded.
Too many clients seeking project funding are illiterate to the rules. Too many clients seeking project funding fail to acquire the funding they need because of their own ideas of structured financing. Guess what ? - it doesn't work!
The Web Lender was approached this week by a client seeking $20 million for a construction project. He told us that once the project was built, he had an investor ready to buy, and that's how he would repay the debt. So we asked him why the investor would not fund the project to begin with, wouldn't you? This is a good example of why projects don't get funded.
Without rules and regulations there would be anarchy. The fact that clients seeking project funding don't like the rules is irrelevant. No investor, no investment bank or reputable financial institution which is highly regulated, is going to break the rules and comply with Jo Shmo's suggestion to fund his project. And the sooner this is understood and accepted, the sooner their projects will be funded.
Put another way, nobody can walk into your office and tell you how to do your job. What makes a client seeking project funding think that he can demand terms of conditions from someone willing to lend him money? If you really think about this, it's insane.
Without knowing the rules, and trying circumvent the rules has only one outcome - failure. So before sending your project summary or business plan for funding, you'd better know the rules of project finance or you're wasting everyone's time, including your own.
Those with money to lend and/or invest have the power. They determine the structure of the funding, the terms, the conditions, and there's no place for negotiation. Would you buy a car with three wheels?
If you're serious about project funding, educate yourself, put yourself in the shoes of the funder and ask yourself, 'would I invest in this?'.