So I get this random email from this local bank asking to collaborate with us on projects. She rightly points out that because most projects are killed by lack of financing, we should work together seeing as I am deeply involved in this sector. She goes on to give me snapshot of their success projects in town, done of which are quite impressive and are the talk of town.
Wait a minute; are banks now hawking construction-financing deals? Are the days of begging to be funded finally over? Hopeful, huh!
This quest almost disturbs me but I quickly realise the blessing that may just have been placed on my lap. I start seeing an opportunity for collaborative project partnerships where we will be able to package deals that are bankable in all fronts. Hallelujah! But what really are financiers looking for?
First of all, these financiers screen the professionals they are to work with thoroughly. Authentic and accredited consultants who must have indemnity covers are most attractive. They vet these with care in a bid to minimising the associated risks.
Secondly, the projects are subjected to security. Besides their feasibility and viability, they are tested for authenticity. From the land ownership to the land use to the required approvals, name it. A title deed being accepted by a financier will be free of controversy and any change of user approvals will have been verified. Nema, Council approvals, land rates, stamp duty, name it, all have to be in a good position.
Then there is the bulk of commercial feasibility. Here numbers will be crunched to a point of no lie. The cost of project versus the revenue realisable, the payback period versus the returns on investments and the relative ratios of investment will form part of the financial analysis.
And of course, there is the silent clause in abilities to meet the cost of finance. Yes, one must service the loan during construction and meet some portion of the cost of finance (I think this is punitive!). The funny thing is the liability of this loan somehow jumps to the promoters or owners of a project despite the legal separate entity of the trading companies.
When all is said and done, financiers are investors. They are looking for the deals that have the best returns in the shortest time possible. Deals that is almost free of risk and free of controversy.
The writer is managing director, Anka Consultants Ltd, quantity surveyors and project managers. Email: [email protected]