Starting a big business is something that you cannot do alone. This is because you cannot possibly have all the funds to start the business. Therefore, you will need investors and lenders to help you in financing the program. Big investments like government infrastructures, stadium and oil companies are financed by several lenders and investors. Commercial project finance is therefore the main means of financing for such programs. The profits will depend on the returns once the program succeeds. If you do not know much about this financing, below are some key elements that you should know.
The first party of this program is the owner. This is also called the private sector owner. He/she owns the project. This is however not a single person but a corporation/partnership. The partnerships are created for the main purpose of providing funds for the program. The corporation thus controls all contracts, operations, construction and borrowing that are affiliated with the program. They are simply called a projectco.
The program sponsor is the second element in this whole process. This person actively takes managing roles of the initiative. This is the person that owns the program. Hence, if the program becomes a success, the sponsor will get profits either through ownership of the program or through the management contracts. Therefore, this person makes sure that the program succeeds by covering any arising risks or liabilities.
The lender or lenders are another key element in this financing option and running the program. These usually include commercial banks, investment banks as well as other institutions that provide loans to fund the initiative. A single lender cannot be allowed to fund the entire projects. Hence, several lenders come together to form a syndicate to pool funds to fund the initiative.
The next party is the agent. An agent is usually one of the lenders who become appointed to become the agent. This is the person that will represent all the other lenders when the loan will be administered. Therefore, the lenders have to come together and select the person that will be their representative. In some cases, these institutions can even vote if there are several proposals.
Another party of the program is called the account bank. This is also a representative of the syndicate. This account bank is the account that will hold all the cash flow. This means that all the money that the initiative will generate passes through the account bank. This is a critical role that needs trustworthy people.
Equity investors are also not left out as they are also vital to the plan. However, they may not have any active role to play. They normally include sponsors and lenders that do not play active roles. However, if the program succeeds, they will get high returns just like the other parties.
Last but not least, there are contractors, suppliers and customers that play a big role in the program. The suppliers have the role of providing all materials required for the construction. The contractors then design and put up the building. Customers are there to complete the equation. Other parties are also present and you should check them out.
The first party of this program is the owner. This is also called the private sector owner. He/she owns the project. This is however not a single person but a corporation/partnership. The partnerships are created for the main purpose of providing funds for the program. The corporation thus controls all contracts, operations, construction and borrowing that are affiliated with the program. They are simply called a projectco.
The program sponsor is the second element in this whole process. This person actively takes managing roles of the initiative. This is the person that owns the program. Hence, if the program becomes a success, the sponsor will get profits either through ownership of the program or through the management contracts. Therefore, this person makes sure that the program succeeds by covering any arising risks or liabilities.
The lender or lenders are another key element in this financing option and running the program. These usually include commercial banks, investment banks as well as other institutions that provide loans to fund the initiative. A single lender cannot be allowed to fund the entire projects. Hence, several lenders come together to form a syndicate to pool funds to fund the initiative.
The next party is the agent. An agent is usually one of the lenders who become appointed to become the agent. This is the person that will represent all the other lenders when the loan will be administered. Therefore, the lenders have to come together and select the person that will be their representative. In some cases, these institutions can even vote if there are several proposals.
Another party of the program is called the account bank. This is also a representative of the syndicate. This account bank is the account that will hold all the cash flow. This means that all the money that the initiative will generate passes through the account bank. This is a critical role that needs trustworthy people.
Equity investors are also not left out as they are also vital to the plan. However, they may not have any active role to play. They normally include sponsors and lenders that do not play active roles. However, if the program succeeds, they will get high returns just like the other parties.
Last but not least, there are contractors, suppliers and customers that play a big role in the program. The suppliers have the role of providing all materials required for the construction. The contractors then design and put up the building. Customers are there to complete the equation. Other parties are also present and you should check them out.
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