Currently, modernization of factories and enterprises loans and financing are rapidly developing, giving the business up to half of the required financial resources. The global transition to Industry 4.0 requires additional funds to ensure the technical re-equipment of industrial facilities. This process has accelerated since the pandemic, pointing out the critical importance of digital technology to businesses. Industrial enterprises are constantly in need of equipment upgrades and expansion of production capacities, which generates a high demand for debt financing.
Viola Funding Limited offers long-term investment loans for the modernization of factories and enterprises in Europe and other countries.
We provide our corporate clients with a full range of financial, legal and engineering services for the implementation of large projects.
Loans for the construction of enterprises and factories: standing features
Investment lending is most often a long-term process that includes a set of financial mechanisms. A feature of investment loans is a clear focus on ensuring a further increase in value through the creation of new production capacity, construction, reconstruction, modernization, as well as securing the ownership of the facility for the borrower.
This financing mechanism can be provided in various forms, helping each company to choose the best option.
Financing the construction of factories and enterprises on a PPP basis
The most important source of financing for the construction and modernization of enterprises are companies’ own funds, local budget programs and bank loans. Thus, the role of bank lending in the development of PPP projects has significantly increased, providing the state and business with new opportunities.
This potential source of financing can play an important role in financing industry, provided that interest rates are kept low and the policies of national banking regulators are prudent.
Financing industrial projects on the basis of public-private partnerships (PPP) is of great importance for the development of many strategic industries, since it allows you to successfully implement capital-intensive projects on favorable terms.
The government, through the implementation of such industrial projects, will contribute to the improvement of the investment climate and the growth of confidence in the national currency.
Factory modernization for competitiveness essentials
The competitiveness of a factory largely depends on the quality of management processes and the competitiveness of products.
The development of the economy of any country can be called successful only when its strategic sectors and enterprises produce modern and competitive products and increase production capacity to satisfy the market.
The main task of an industrial enterprise, inextricably linked with production efficiency, ensuring the production of the required amount of high quality products, is to achieve competitiveness of products in the market in the context of continuous implementation of modernization. The competitiveness assessment allows the business to identify the strengths and weaknesses of the enterprise, which, in turn, makes it possible to mobilize hidden opportunities to gain a favorable position in the market.
The need for the modernization of factories is due to the influence of a number of external and internal factors. Among the most powerful external factors, financiers name the irreversible globalization of the market and increased requirements for industrial facilities. Only countries that carry out systemic modernization and orient the economy towards increasing the share of innovative products win the competition.
Modernization of industrial facilities ensures sustainable and efficient development based on the achievements of technical progress, renewal of equipment and technological processes. The goals of modernization include optimizing the production structure, improving quality, increasing productivity, as well as the widespread introduction of energy efficient technologies and increasing the competitiveness of products in foreign and domestic markets.
The high operating costs and low technical level of production processes that are common in many developing countries require urgent measures for the survival of the business for the foreseeable future.
Financing sources for the modernization of enterprises and factories
Self-financing is clearly the dominant source of funding due to the complexity and high risk of borrowing. The reasons for this risk can be different. In developing countries, businesses most often have to deal with an unfavorable investment climate, underdeveloped financial markets and venture financing instruments, as well as with imperfect investment legislation.
Self-financing of the modernization of factories is carried out mainly through the use of profits of enterprises and depreciation deductions.
Self-financing of production activities does not allow businesses to timely and efficiently reallocate resources as a result of their cohesion, which causes many structural and technological obstacles. The crisis events associated with the pandemic have led to a reduction in the profits of many industrial enterprises. An acute shortage of domestic financial resources to support current activities contributes to the attraction of borrowed capital, including in the form of bank loans for the modernization of the enterprise and the expansion of production.
External sources of financing for the modernization of factories can be programs of the state and local budgets.
The objectives of project financing can be as follows:
•Overhaul and construction of production facilities. •Refinancing due to the lack of current resources for modernization. •Financing of changes in the structure of production facilities of the facility. •Financing an increase in production capacity.
The management of modernization projects should use appropriate criteria when making decisions. One of the main tasks of successfully attracting investment in modernization is to substantiate decisions on the choice of optimal project financing instruments for specific financial and economic conditions.
For the capital provider, on the contrary, the lender status is much less risky, which is due to the peculiarities of the bankruptcy procedure and some other factors.
Leasing as an alternative source of project financing for factories modernization and constructions
Traditional methods of financing industrial upgrades may include purchasing new and used machinery and equipment at own expense, as well as purchasing machinery or equipment at the expense of loans. Against the backdrop of a crisis, with a lack of own funds in many industrial enterprises, banks set higher standards for potential borrowers and require a solid credit history.
Leasing is widely used all over the world to modernize factories.
It is a profitable alternative to bank lending for technical and technological renovation of machine-building enterprises and other facilities.
Using leasing mechanisms, the company gets the opportunity to use technical means for the entire or most of the life cycle and overcomes the disadvantages of the above traditional methods of financing.
To ensure a strong position in the world market, it is necessary to technical renewal of production, as well as the introduction of modern technologies with all their long-term advantages.
Growing competition and tightening global standards require businesses to search for new approaches and mechanisms for project implementation, as well as the introduction of advanced sources of financing for the construction and modernization of industrial facilities.
If you are interested in construction, expansion or modernization of factories and enterprises loans contact our financial team. We provide a full range of financial, engineering, legal and consulting services for large businesses around the world.
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