10 Considerations or Strategies to Follow in Financing an Eco Project
If you want to have a successful green or eco project, it is important that you are able to finance the project. More importantly, it is important that you get the right type of financing for the project otherwise the project may be stalled by high debt costs and other inefficiencies and redundancies.
Many eco or green projects are taking the place of new and rehabilitation projects due to the new shift of focus to protect the environment and to produce systems that are energy efficient and sustainable. Many green projects have also become very attractive to investors because they produce very healthy balance sheet numbers.
Below are a few considerations and strategies that you can use to finance your green or eco projects.
Find a lending institution that has a background in green or eco-financing
It is important to do the research to find a bank or lending institution that has a speciality in dealing with eco or green projects. This will help you avoid a lot of explaining and waste of time.
Choose an existing financing model that would suit your project
If no financial model or package exists for bankrolling your project, it is better to choose a financial model that is close to what you want and then adapt it to your needs.
Tweak the chosen model to suit both your needs and those of your lender
Once you have decided on a financial model to finance your project, the next important step is to tweak it so that it suits both you, your project and the lender.
Come-up with and agree on the terms of the financing in advance,
Once you have agreed on the financial model, get clear about all the other terms of the financing including, interest, period of repayment and what happens in case of default.
Determine each parties duties and responsibilities
Since most green projects enjoy a lot of support and incentives from governments and larger global and regional financing institutions, it is important to agree on each party’s roles and responsibilities so as to avoid any conflicts or conflicts of interest. Ownership and transferability are the more important concerns here.
Document your experience
Especially if the financial vehicle used to finance your project is new, it is important to collect data and to document your project so as to give the industry a template to work with in future projects. This will help the industry become more efficient and therefore more cost effective in financing future projects for yourself and for others.
Be prepared for elaborate and time consuming financial preparation
Since this type of financing is still new to most financiers and professionals in the industry, be prepared for the maturity of the financing to take a relatively longer period of time as compared to traditional financing.
As borrowers and lenders begin to understand and get used to these eco financing vehicles, efficiencies are bound to be realized and improved.
Anna R. Long is an executive in a private equity firm and has been in the finance industry for the last 13 years. She has written several national debt reviews and is active at educating the youth on career choices. Visit her blog for more information.