Joint Venture model of business financing has gained popularity due to its flexible nature. This model can be used for most kinds of investments ranging from real estate development to government project such as mining and power generation. It is important to note that even governments go into joint ventures with private companies so as to enable them achieve their goals. Joint venture project funding is very common today due to its numerous benefits.
In this model two groups enter into a legal agreement to pull resources for the completion of a particular project. In many cases the parties may share the profits and liabilities sixty forty or seventy thirty. When one has a prime piece of land, they can source for funding through a joint venture. In such a case they can provide the land where as the other group provides the finances required for developing the land.
Another common way of financing a project is by getting a loan from a local or international bank. Although many people consider this approach strait forward, the terms often given by banks and other lending institutions make it difficult for people to access such loan facilities. In many cases, one may feel that the interest charged is too high thus discouraging many from using this particular approach.
Joint venture model can be used for different business projects, thus many people would prefer to go this way. It is important to note that this model is not restricted to large companies only, also small and medium sized companies can use this kind of project funding option to increase their productivity and capacity. One of the most rewarding benefits of joint ventures is that it can result to faster growth.
In the case of real estate development projects, the property owners are required to have already come up with architectural and structural design drawings complete with bill of quantities. It is important to note that most financiers require that all state and environmental approvals should have been done before the proposal is submitted for consideration.
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.
This is a legal document that spells out the various roles of the two parties and how they will work together so as to achieve the objectives and goals of the joint venture. A good agreement should be detailed and clear. It is important to get a professional lawyer who is well experienced in such agreements. This ensures that both parties are well informed before they get into that agreement.
After the two parties have accepted the terms of the agreement, a special purpose vehicle is formed. This company will be directly responsible for the project. The two parties form a board that will appoint the project managers, contractors and suppliers. It is important that the two groups work together transparently so as to ensure that the objectives of the joint venture are attained within the stipulated time.
In this model two groups enter into a legal agreement to pull resources for the completion of a particular project. In many cases the parties may share the profits and liabilities sixty forty or seventy thirty. When one has a prime piece of land, they can source for funding through a joint venture. In such a case they can provide the land where as the other group provides the finances required for developing the land.
Another common way of financing a project is by getting a loan from a local or international bank. Although many people consider this approach strait forward, the terms often given by banks and other lending institutions make it difficult for people to access such loan facilities. In many cases, one may feel that the interest charged is too high thus discouraging many from using this particular approach.
Joint venture model can be used for different business projects, thus many people would prefer to go this way. It is important to note that this model is not restricted to large companies only, also small and medium sized companies can use this kind of project funding option to increase their productivity and capacity. One of the most rewarding benefits of joint ventures is that it can result to faster growth.
In the case of real estate development projects, the property owners are required to have already come up with architectural and structural design drawings complete with bill of quantities. It is important to note that most financiers require that all state and environmental approvals should have been done before the proposal is submitted for consideration.
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.
This is a legal document that spells out the various roles of the two parties and how they will work together so as to achieve the objectives and goals of the joint venture. A good agreement should be detailed and clear. It is important to get a professional lawyer who is well experienced in such agreements. This ensures that both parties are well informed before they get into that agreement.
After the two parties have accepted the terms of the agreement, a special purpose vehicle is formed. This company will be directly responsible for the project. The two parties form a board that will appoint the project managers, contractors and suppliers. It is important that the two groups work together transparently so as to ensure that the objectives of the joint venture are attained within the stipulated time.
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