Project funding fees and costs

Project Funding Payments.

In the world of project finance, many entrepreneurs refuse to pay “upfront fees” for their project. When you apply for debt financing, the lender may need to implement a financial structure that will allow you to start a project and also determine your ability to repay the loan. While it’s true that you may not have to make any upfront payments, there are often associated costs.

Fees V costs:

A fee is when you are asked to pay for the services of providers, whether it is for arranging the financing package through the agent or a fee charged by the funder themselves. This fee is usually charged at the end of the funding process.

Cost is something that cannot be avoided. The money goes towards actual events like purchasing a banking instrument on your behalf, locking funds within a hedge fund, or securing private equity funds. All of this comes at a cost.

What is included in the cost?

The costs can include a number of things, e.g. B. the securing of collateral. Suppose you have a project that has NO collateral and is not yet generating revenue. Generally, lenders/lenders protect the money lent by securing it against some form of security. As a project in its early stages, they have no collateral. It is quite common for funders to need external collateral by purchasing instruments to hedge against the project.

This often involves another entity pledging its assets against the instrument for 1 year and 1 day. You now have two vulnerable parties, the company pledging its assets against the instrument and the lender buying the instrument to lend it – this has costs. Other costs can include: 1) due diligence, 2) paying for flights for face-to-face meetings, 3) locking funds within a hedge fund, 4) securing funds from private equity investors, all of which have very real costs. Not to say that all companies have these costs.

Payments and Commission

Raising project funds can be pretty reckless. Please read your agreements and terms carefully when applying to brokers or lenders as some companies have been known to charge ridiculous signup fees, advances, Skype calling fees and an exit fee. All of this can be legitimate, but there are these funders out there who are just out to collect the fees and very rarely bring any funding results. I’ve heard that some companies charge 20,000 just for the application fee and exit fees can be expensive, making it difficult for companies to go elsewhere if they haven’t received funding within 12 months.