As a project manager or investor, one of the most significant challenges that you’ll face is financing. Project finance is crucial because it determines the success of your venture and investment. And while challenging, there are several strategies and tricks that can help you navigate through the complex maze of project financing. To assist you with this task, we’ve compiled a list of essential project finance advisory tips that will help you streamline your financial activities and improve your bottom line. So, whether you’re financing a renewable energy project or funding a real estate project, read on to learn more.
Develop a Project Finance Plan
One of the most important things to do when funding your project is to develop a project finance plan. A project financing plan is a comprehensive financial roadmap that details how you plan to finance your project. It contains information on how much money is required, how the funds will be sourced, how they’ll be used, and when they’ll be utilized. Additionally, it should project the cash flow for the entire lifetime of the project. A finance plan is essential because it helps you stay on track financially and helps you remain focused on achieving specific mileposts.
Build a Strong Financial Team
The success of any project depends on the expertise and skill of the team behind it, and that includes the finance personnel. Project finance advisory experts will be required if you’re not an expert in finance. A robust financial team should have different professionals in finance roles such as a controller, an accountant, and an auditor. These financial experts should be hired based on their experience and track record in project financing. With the team on board, you’ll streamline your financing functions, allowing you to execute things like securing loans and acquiring equity financing.
Determine the Right Funding Mix
A major determinant of project financing success is having the right mix of capital, be it loan capital, equity capital or project finance loans. Knowing this upfront helps to ensure that you source the right capital at the right time and from the right sources. Understanding this mix is essential in facilitating the process of securing required funds. Ensure you know the risk profile of your project because the mix will be influenced by the risk profile of the project. As a result, it is important to select appropriate financing options that meet your project’s funding needs.
Delegate Financing Responsibly
Delegating financial responsibilities is an essential part of any project. Knowing how to delegate financial responsibilities, however, is of utmost importance. Your finance team should have a thorough understanding of the various financing options that can be used in raising funds for the specific project. The delegation of financial responsibilities should involve an identifiable link between those that approve funding, those that raise the funds and those that deploy the funds. Successfully delegating financial roles gives your team the needed independence to deliver on set objectives without having to face bottlenecks resulting from raised funds bearing multiple and uncoordinated approvals.
Lastly, adopting a technology-driven approach in finance functions can be a game-changer. By implementing software solutions tailored to managing the lifecycle of funding, you can streamline various funding processes, thus yielding to successful project financing. From invoice processing to payment automation, technology-innovations simplify many tedious financing tasks. Make use of technologies that involve virtual data room solutions, E-signing applications, and other customized enterprise relational apps that provide robust collaboration, reporting, and scheduling tools.
Indeed, project finance advisory can be quite challenging, but with the right strategies, it can be simplified. Develop a project finance plan, build a strong finance team, determine the right mix of funding, delegate financing responsibilities, and leverage technology. Incorporating the above tips and tricks will not only improve your chances of getting the funds you need but also make your projects more effective and efficient. Ultimately, adopting the above-discussed tips is an investment in the productivity of your team and the success of your projects.