Investment loan: bank or fund? viola-funding June 22, 2023

Investment loan: bank or fund?

Investment loans and investment funds for business development
Investment loans and investment funds for business development

Financing large projects refers to the use of “long money” schemes, since the development of investments and the achievement of adequate cash flows is a long process. Along with bank investment loans and investment funds capital plays an important role in business development around the world.

Banks as sources of financing investment projects are becoming increasingly important, mainly we are talking about various forms of investment banking. It involves the direct participation of banks in business in order to receive not only interest, but part of the profits from the project.

Viola Funding Limited offers investment loans and investment funds, including a long-term financing for major projects around the world. 

We also help finance the construction of Geothermal Power Plants, loans for construction of large projects seaports, LNG terminals, oil pipelines, commercial real estate, roads and other facilities.

Investment loans: Precedence of banks for project financing

A bank investment loan is an external source of financing for investment activities, which is provided on the terms of repayment, security and targeted use of funds.

The project for which an investment loan is requested may not have sufficient financial attractiveness (funded facilities may not generate income at all or affect it indirectly), or the financial flows within the project may not be sufficient to service the investment loan.

Investment fund VS project financing

An investment fund is a financial institution that manages the money of investors or depositors. According to the ownership, investment funds are classified into state, municipal and private funds.

However, a real surge in the popularity of investment funds took place in the United States and Great Britain after the end of World War II. Currently, about 100 million Americans own shares in various investment.

The investment fund performs a number of specific functions

•Ensuring effective asset management.
•Accumulation of funds of numerous investors in the pool.
•Reducing the costs of transactions in the securities market.
•Investing in various financial instruments to diversify risks.

Any fund must pass a rigorous audit and obtain a license from the local stock market regulator that controls the activities of such institutions. Without an appropriate license, the investment fund does not have the right to carry out activities.

The activities of investment funds are regulated by national law.

The undoubted advantages of investment funds are the following:

•Investment activity is carried out regardless of the stage at which the company or project is located, which opens up wide opportunities for financing business at different stages.

•Long-term business support, unlike a bank, because investment funds pay attention not only to the present (assets), but look to the future (forecasted financial flows).

On the other hand, these funds also have disadvantages, listed below:

•Relatively high cost of obtaining funds.
•Restriction of freedom of action of companies.
•Increasing the number of liabilities to capital providers.
•The need to prepare reports and analyzes.
•Distribution of future profits with the fund.

The main difference between funding through investment funds and bank loans is that funds are more willing to finance start-ups. Banks, on the other hand, are reluctant to provide investment loans to young projects. In addition, private equity funds finance risky projects without the need to apply for collateral.

If you need a large investment loan for a capital-intensive project, Contact us

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