Why Structured Finance?

Why does Ziyanda Capital offer the services it does? … because the world of finance is not as simple as bridging the gap between those who have capital, and those who have projects that require financing. The world of finance is more complex than simply bridging the funding gap. Bridging the finance gap is more involved than simply saying, “Mr. Investor or Ms. Investor, here is a project owner or promoter who needs money from you, and Mr. or Ms. Project Owner, here is the potential investor that I told you about.” Investors come into the financing picture with unique expectations, as do the project owners. Already, there is what we can term, “expectations asymmetry”, which basically equates to “information asymmetry on steroids”. Why “on steroids” and not just “information asymmetry”? Investors don’t have time to hand-hold nor time to educate project owners or project promoters. Project owners or promoters have 1 (one) shot to impress the potential investors, and if the project owners or promoters happen to mess up that 1 (one) opportunity, they are done. Investors will immediately perceive such project owners or promoters as jokers or time wasters who don’t know what they are doing. Cold, hard fact. Project owners and/or promoters on the other hand, tend to think that capital will pander to their whims, or that capital is desperate to be deployed. Some will even go as far as thinking that the investors will do some of the basic project work for them (project owners or promoters), including identifying project risks and mitigating these risks for the project owners. This becomes evident when we hear people argue, “Yes… but financiers are supposed to be sympathetic to our business or project, … and they must help us to get some of “these” things done.” That sounds like entitlement to mediocrity. Project preparation and packaging is the primary job or responsibility of the project owners and promoters. If you don’t know how, you bring in professionals who are qualified and experienced to assist you. Once, the work related to project scoping, costing and laying out the project implementation plan has been done, you then need to answer questions related to how the project will be funded. This is where you have to deal with optimal financing structures, where you need to balance the portion of finance you want from the lenders, with the portion of finance you want from equity investors. This is also where you need to know, whom to engage and on what basis you are engaging such parties. This is where Structured Finance comes in. Structured finance answers questions related to the project risks, the funding structure, the term of funding, the cost of funding, the repayment plan, project operations risk mitigation, liquidity enhancement, credit sweeteners, project finance optimisation for regulatory benefits (tax shields), etc. Structured Finance will also advise on the appropriate term for the funding of the project, where project owners do not have to endure embarrassing themselves with expectations of getting 20 year loans on projects that typically get funded over 10 years. Structured Finance will also have the knowledge of where to raise the required capital from, and what terms need to be discussed with potential lenders, as well as what terms need to be discussed with potential equity investors. In a nutshell, Structured Finance is the difference between the project owners obtaining funding for their projects as efficiently as possible and the project owners running from pillar to post until they abandon the project altogether, or until someone more savvy implements the very project idea, in the very same area targeted by those who believe that capital will bend over backwards to accommodate their mediocre project. Structured Finance expertise will save you time, pain and will optimise your Return on Effort.

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