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Project Funding Investment Group Financial Sources

By Brenda Warner

There are many projects running globally today. These include government, NGO and private entities. Private entities will mostly be involved in profitable ventures while the government invests in development. Some private companies donate money to developing initiatives for the benefit of the community. All initiatives must raise capital for operations though at times this becomes difficult and thus the need for a project funding investment group. There are many different sources of capital available to them.

Grants are one of the cheapest finance sources available. Research grants are the most frequent types because they are easily available. They are awarded on merit to support breakthroughs in different fields. They include development, medical, market as well as small and medium enterprises grants. They help finance advancements and ventures like technology, medicine, business, wildlife conservation and service delivery. Other grants are export, training, education, social development and environment.

Loans are provided for undertakings but unlike grants, they must be paid back with interest. Most often they are provided against adequate security deposit and dependable earnings or returns. They are provided for all types of projects irrespective of profitable returns. Common sources include banks, monetary organizations and mezzanine. Bank loans are more popular because they provide flexible repayment terms. Monetary organizations include large bodies like the World Bank and International Monetary Funds.

Equity funding is not easily available to most projects because it has high rates of interest. The money is acquired for investing in profitable ventures and businesses. They have strict repayment policies. Angel investors are individuals with high net worth who look for opportunities to invest their money. These investments usually yield a lot of returns. Venture capital is medium term funds used to invest in the lucrative initiatives.

Asset backed financing is available mainly for fast growing businesses and large corporations. One or many assets usually secure this financing. Suffice to say, if the money are not repaid, the security asset is taken to cover the balance. This funding is availed as factoring, leasing, invoice discounting, pension funds and trade finance. It is mainly used when normal methods of raising capital are not possible for example capital markets.

Business relationship finance is formed to join efforts in raising capital for a project. It is available in situations where two entities share a common interest. It is best used in a joint venture relationship with an agreement between companies. Two or many companies can collectively raise enough money for all planned activities. Others include agencies, partnerships, distributors and suppliers, equity shop and trade investors.

All of the above types of finances fall into three different categories. Restricted finance is only used according to stipulated purposes. There is close supervision. Foundations and grants from governments are usually restricted to specific expenditure. Unrestricted funds are used at the discretion of the management of the initiative. Main sources are donors and fundraisers.

Bridge financing refers to a temporary situation. It is used to cover operational deficits before the organization becomes liquid. Deficits occur when grant money and contract financing has been promised to be delivered later. The different types of financing sources available for projects are vast. This is the reason most initiatives have been successful.

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