How much does 100% project funding cost?
For clarification it seems that over the past few years the general Client and amateur Broker have adopted the word “upfront fee” as a catch-all phrase for any legitimate cost in doing project funding.
Therefore does 100% Project FUNDING? = No “Upfront Fees”? Let's examine:
Funding Transaction EXAMPLE:
Law Firm, Investment Bank, Securities Dealer, Management Consultant Firm has inquiry for a 100MM USD capital raise. The Firm will hold a consultation (typically paid for and credited back to Client) and determine the viability of the project. If acceptable Firm will ask to be retained to structure deal for compliance. Once completed Firm will refer to their funding partner i.e. Fund.
Experienced companies who reliably successfully obtain funding for their projects know that they must (and always do) spend the following typical average budgets on required licensed services (to other various firms) to make their project and collateral bankable:
• Law firm work on preparation and positioning the project $ 100,000
• Authorized underwriting to endorse and certify project $ 40,000
• Securing third-party assets as outside Collateral $ 100,000
• Licensed valuations certifying the monetizing value of assets $ 30,000
• Licensed transaction structuring and certification of structure $ 50,000
• Law firm management and facilitation of all aspects of transaction $ 150,000
Total Average Real Costs of Making “Bankable” with Collateral = $ 500,000
The majority of capital-seeking “borrower” clients mistakenly begin by prematurely “shopping for loans”, wrongly assuming they are in any position to do so. They start by asking premature questions about “terms of the loan” and how fast it can be “given”, completely forgetting about whether they are prepared and qualified yet to receive one.
All companies who successfully obtain project funding always spend hundreds of thousands of dollars on the right licensed institutional services and certified preparation work, to make sure they will be qualified, have a “banking compliant” documents package, and have the right kind of collateral that can be widely accepted.
CONCLUSION:
Even though 100% Funding can be available, there will always be soft cost associated. That means the Client must have some liquid capital (as opposed to usual 20-50%) in order to realize the transaction.
By Dale C. Changoo
Managing Principal at Changoo & Associates
Therefore does 100% Project FUNDING? = No “Upfront Fees”? Let's examine:
Funding Transaction EXAMPLE:
Law Firm, Investment Bank, Securities Dealer, Management Consultant Firm has inquiry for a 100MM USD capital raise. The Firm will hold a consultation (typically paid for and credited back to Client) and determine the viability of the project. If acceptable Firm will ask to be retained to structure deal for compliance. Once completed Firm will refer to their funding partner i.e. Fund.
Experienced companies who reliably successfully obtain funding for their projects know that they must (and always do) spend the following typical average budgets on required licensed services (to other various firms) to make their project and collateral bankable:
• Law firm work on preparation and positioning the project $ 100,000
• Authorized underwriting to endorse and certify project $ 40,000
• Securing third-party assets as outside Collateral $ 100,000
• Licensed valuations certifying the monetizing value of assets $ 30,000
• Licensed transaction structuring and certification of structure $ 50,000
• Law firm management and facilitation of all aspects of transaction $ 150,000
Total Average Real Costs of Making “Bankable” with Collateral = $ 500,000
The majority of capital-seeking “borrower” clients mistakenly begin by prematurely “shopping for loans”, wrongly assuming they are in any position to do so. They start by asking premature questions about “terms of the loan” and how fast it can be “given”, completely forgetting about whether they are prepared and qualified yet to receive one.
All companies who successfully obtain project funding always spend hundreds of thousands of dollars on the right licensed institutional services and certified preparation work, to make sure they will be qualified, have a “banking compliant” documents package, and have the right kind of collateral that can be widely accepted.
CONCLUSION:
Even though 100% Funding can be available, there will always be soft cost associated. That means the Client must have some liquid capital (as opposed to usual 20-50%) in order to realize the transaction.
By Dale C. Changoo
Managing Principal at Changoo & Associates