How To Finance A Project

Whether undertaking a home improvement project, invention project or something else altogether, successful completion requires knowing how to finance a project. Project financing requires attention to details and a solid project plan. When deciding to finance a project, start with the preparation phase before contacting financial institutions or other investors.

  1. Calculate how much the project will cost. To finance a project, the first step is determining how much financing is necessary. Obtain quotes from contractors or estimates from manufacturers to determine how much cash outlay is necessary to finance a project to completion.
  2. Determine revenue generation prospects of the project. If you project will produce revenue (such as an invention), forecast potential revenue growth and profitability of the project. These revenue and profit projections provide lending institutions and individuals the necessary information needed to determine financing suitability.
  3. Gather personal income documentation. If your project does not generate revenue (such as a home improvement project) you will need to provide income and/or asset documentation. Financial institutions will not lend unless they are confident they will get their money plus interest back; income and asset verification is one way they do this.
  4. Invest in your own project. Showing potential investors that you have a dog in the fight goes a long way towards attracting additional investors. Invest your own cash so that you have a vested interest in the project’s success. Other investors will see this and are more likely to help you finance a project.
  5. Look for alternative forms of investment. Financing can come from a variety of sources. If traditional bank financing is out of the question, consider cashing out some of the equity in your home (this is an excellent option for home improvement projects). Additionally, certain business projects lend themselves well to angel investors.
  6. Approach family members for project financing. Personal loans from friends or family are an excellent alternative to bank financing. You can create loan terms beneficial to everyone that are often better than those you may receive from a financial institution.
  7. Look for government grants. If your project is beneficial to the community, the federal government or local government may be sponsoring a grant. Search for these grants to see if they are applicable.
  8. Search for potential financiers who have a vested interest in your project. Suppliers or end users often have a vested interest in the success of your project. Determine who these parties are and approach them to determine if they may help with project finance.

Depending on your endeavor, it may prove difficult to finance a project. Plan ahead and show potential investors or financiers your project will generate adequate profits or you have the required income for a loan. Tenacity often wins out-keep trying to finance you project and your odds of success will increase.

 

Reference:

The Wharton School: Project Financing Teaching

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