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Benefits Of Joint Venture Project Funding

By Daphne Bowen

In the ever developing world of today, many companies are pumping huge sums of money into various projects in different parts of the world. The real estate sector is one of the very many appealing investment option. It is important to note that although this kind of investment is very lucrative, many people are shut out because of the large sums of money required to facilitate the large projects. One of the ways one can tap into this business is by getting Joint venture project funding from the different financial institutions available.

In most cases, developers often seek for funding from large banks and international financial agencies that provide direct funding. This method is generally expensive due to high interest rates and long payment periods. The other model which is flexible and less demanding is the joint venture model. Joint venture involves two or more parties bringing their resources, knowledge and expertise together so as to accomplish a particular project.

Generally, property owners can partner with an investor who has the capability of raising the finances needed to build or establish a business. In this model, the profits and losses are shared based on the contributions of the parties. Some people opt for a seventy thirty sharing or a sixty forty. When it comes to commercial development of a property, the land owners may bring the land as their contribution.

The investor can now bring the money required to finish the property development work. It is important to note that most investors prefer to come on board after all the ground work has been done. This includes development of architectural and structural plans. Also, they may want to ensure that the local authority have approved the developmental plans.

Well done plans greatly contribute in attracting able investors. The first step in securing a joint venture partner is to come up with a proposal. It is important to note that most financial institutions have clear terms and requirements. Developers should get to know what investors want so as to increase their chances of securing finances. Well done plans and feasibility study show how lucrative the project can be.

After getting potential investors, it is advisable to go through their terms and identify those who have requirements that suit the project needs. Some investors may have hidden costs and funds processing fees which may be too expensive for the property developers or project owners. The next step is for the two or more parties to enter into joint venture agreements.

In many cases, joint venture agreements can be very complex. This can be attributed to the very many details that need to be discussed and agreed upon before the various parties put pen to paper. Another possible area that needs to be well discussed is that sharing or roles and benefits. Clearly stating the various roles of the parties can go a long way in ensuring that all misunderstandings are quickly resolved.

When coming up with the agreements it is advisable to get well experienced lawyers. This ensures that no important details are left out or forgotten. It is important to note that most joint ventures are complicated but very rewarding. Also unlike banks, investors have flexible terms and requirements that can be easily met even by small companies.

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