Project Financing : A Project

1637 Words7 Pages
Project financing will be beneficial to an enterprise who wish to fulfil a project when the project is of a very desirable nature that purchasers will be inclined to enter into long term purchase contracts, and these such contracts would have guarantees that banks will be willing to advance funds to complete the project on the foundation of the contracts. It can be very useful to lenders as it decreases the risk of failure as well as the price of resolving financial distress. The model candidates for project financing are investment projects that are able to function as sole independent units, can be completed without undue uncertainty and when finished will have more value than the cost of construction. There are four factors that should be met when contemplating project finance. The credit requirements of lenders in terms of the forecasted profitability of the project and the indirect credit backup given by third entities. The tax implications and the tax benefits for those involved. The regulators and legal specifications that must be met. The treatment of project liabilities and contractual agreements. While project financing could in theory be applied to all aspects of international construction, and large projects, there are however some factors that must be considered to verify if project financing is the appropriate method. The right candidates are those that can function independently from an economic point of view, can be finished without any uncertainty, and
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