Funding a micro finance bank; a long-term investment projects viola-funding July 25, 2023

Funding a micro finance bank; a long-term investment projects

Funding and investment of microfinance banks
Funding and investment of microfinance banks

Microfinance services refer to loans, deposits, insurance, fund transfer and other ancillary non-financial products targeted at low-income clients. Any company looking to conquer the SME  market must find the reliable sources of capital it needs to start and build a business. Funding and long-term investment of microfinance banks can be challenging, especially when it comes to capital-intensive investment projects with a strong innovation component and a high level of risk.

Three features distinguish microfinance from other formal financial products:

  • smallness of loans and savings,
  • absence or reduced emphasis on collateral, and
  • simplicity of operations.

Viola Funding Limited with years of investment experience, is ready to finance large projects and funding for microfinance banks globally.

We offer large long-term loans, organize project finance, create and manage SPVs, provide financial modeling services. Our experienced team guarantees comprehensive support to our clients at all stages of business development.

Funding for microfinance banks: choosing a source

There are several ways to finance a microfinance banks. The most widespread ways to raise capital are by issuing stocks and bonds, as well as obtaining a bank loan. Venture financing is less commonly used, as well as various mezzanine financing instruments for MBO deals, and so on.

Not all of the above methods of financing a business are available to every business. To receive funding, the founder (owner) of the company must properly prepare both the company itself and the entire process of raising capital.

Preparing for business financing

Preparatory activities should begin even a few months before the planned date of the project implementation.
This is because it can take a long time to complete certain optimization steps. However, a lot depends on the specifics of the company or industry. In all areas, working with trusted advisors specializing in investment, finance, accounting and legal matters should be key.

Scenarios aimed at preparing businesses for raising capital include:

•Comprehensive analysis of the project and its business environment. •Planning the necessary optimization processes and a schedule for their implementation. •Professional development of a business plan and contract documentation.

Despite what type of business financing a company is looking for, it is always necessary to prepare detailed investment materials for its future partners. The attitude of American investors to such materials is very reverent, so this element can be called an important stage in preparing for financing. These materials differ depending on the specific type of financing.

Angel/Financial investors: An important role in the funding of microfinance banks is played by the so-called financial and angel investors. These are venture capital funds, private equity funds or private investors (business angels or a consortium of investors). Finding the right investors can be a challenge as the highly competitive  capital market seeks the best solutions and investment opportunities.

To conduct the process of finding an investor, company representatives should arm themselves with at least three investment materials. This is an investment teaser, a presentation for an investor, and a financial model as a reflection of the implementation of the adopted business strategy.

A prudent investor will never agree to finance a business if he cannot thoroughly understand its business model, market environment and how to achieve its goals.

Bonds vs loans for funding a micro-finance banks

A business loan can be provided with or without collateral. The loan may be secured, inter alia, by commercial real estate and equipment used in production, stocks of raw materials or other liquid assets at the disposal of the borrower at the time of signing the loan agreement.

In the case of a secured loan, the analysis of the company and its potential is secondary.

The lender pays particular attention to the reliability of cash flow forecasts. Financing a business with an unsecured loan carries a higher risk for the lender than with a secured loan.

A wise lender should conduct a detailed analysis of the company to which he intends to lend money. This means that the lender’s expectations from the investment materials presented will be similar to those of the investor purchasing the shares.

The process of seeking financing for a company in the form of an unsecured loan is similar to raising capital through stocks or bonds. Viola Funding Limited is ready to provide your business with comprehensive assistance in finding sources of financing.

Factors influencing the choice of funding for microfinance banks

SME’s or company’s early stage startup have limited funding sources. Most often, bank lending is not available  to them. Basically, creditors’ doubts are related to the short life of the company and insufficient reliability.

For these types of companies, funding is most often available only through venture funds and private investors (business angels). In terms of loans, some investors use equity-convertible loans. As the company grows and investment risk decreases, the number of business financing options increases. Lenders take into account the company’s financial health, organizational structure, operating history, and a number of other factors.

Equity financing is available for limited liability companies and joint stock companies.

The bank’s requirements for an individual entrepreneur and a limited liability company will also differ. In this case, it is impossible to say unequivocally which form of business is more expedient.

A summary of the business model should be presented in an investment teaser, and in detail in the form of a spreadsheet (financial model). The search for business funding and investment of microfinance banks should not begin until a detailed operating model has been developed and tested for each of the above areas. Our finance team provides professional financial modeling services.

Large bank loans for funding a microfinance banks projects

Obtaining a bank loan for a microfinance bank business in practice is usually a complex process that requires the preparation of many documents and multi-stage negotiations with potential lenders. Large loans are rarely provided to young companies/sme’s that have been operating for less than 1-2 years.

A significant problem that complicates obtaining a bank loans for a microfinance projects is the lack of profit in the previous fiscal year and poor financial performance in general. For most banks, even a small loss is unacceptable, which is why such risky deals are usually not approved. Of course, a lot depends on the attractiveness of a particular project, the situation in the company and its industry.

If you would like to receive financing for a large constructions project without collateral, our finance team will help you develop an individual project finance (PF) model. Our schemes allow clients to attract large long-term loans against the future cash flows of a specific investment loans. We are also ready to help you with the establishment and management of SPVs, fundraising and project management at any stage.

Benefits of a loan for funding a company and microfinance business

The main advantages of a loan include the relative ease of obtaining, which is mainly reduced to the provision of financial documentation and the conclusion of a loan agreement. Unlike project finance schemes, traditional bank lending usually does not require lengthy multilateral negotiations and complex contractual structures.

Viola Funding limited helps clients to obtain large loans for business anywhere in the world and other countries, working closely with the help of our high-net-worth angel investors.

We are ready to offer a loan of $100 million or more for up to 20 years to help your company implement a new investment project or refinance debts.

Secured business loan: A secured loan gives the sponsor of the project an additional guarantee of repayment of the debt.

Unsecured business loan for funding a microfinance bank

Unsecured business loans help many innovative industries such as electronics, IT, renewable energy sector,  funding and investment in microfinance banks and others to grow. If you are looking for a large loan for business development, please contact us.

Venture financing of microfinance business

This is the moment when a company needs significant funds to bring a product (service) to market widely. An early expansion is a phase that occurs after a positive market test. Venture funds play an important role in financing young companies with ambitious capital intensive projects.

In simple terms, the early stages of development are the period from the beginning of the transformation of an idea into a business model to its early expansion.

We are ready to help you at any stage of your business project implementation.

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