Clients seeking project finance often ask us, “How long does it take to fund my project?” If you’re a loan broker, advisor, or business consultant, you’ve probably heard this question more times than you’ve had hot dinners.
The question itself is an indication that the client does not understand how the lending processes work. It also indicates the clients’ urgency to be funded which, in itself, is a huge red flag and subject to lengthy discussion at another time.
Many clients submit finance requests for projects that have been seeking finance for a number of years. Let me repeat that, a number of years. Why? There’s a goodly number of reasons why. Here are a few:
– The project itself is not-fundable;
– During the course of due diligence it was discovered that information was misrepresented;
– Material events were introduced as a result of the client’s actions;
– The client did not see the value of paying for the service to help acquire funding.
The timing of securing funds from the moment an application is submitted is solely dependent on the client and never on the funder / investor.
Let’s take an example of a client requesting $1,000,000 for business expansion. The funder asks the client to produce four documents (whatever they may be) and the client has three prepared but needs time to prepare the fourth. The time it takes the client to prepare and submit the fourth document increases the time it takes to secure the funding and close the deal.
Another delaying factor when it comes to timing is incorrectly prepared documentation such as lengthy business plans and executive summaries. Many clients write these plans and summaries from a one-sided perspective, meaning they write what they think a funder wants to read rather than writing a clear and precise picture of the project’s advantages. Such business plans are simply not presentable to prospective funders / investors.
Business plans that are outdated, more than 6 months old, and business plans containing more than 12 – 15 pages are never read. Ditto executives summaries more than 4 pages, with the keyword here being ‘summary’. The best executive summaries are two pages. The first page containing verifiable information about the company, its executives, its financial goals, and its exit strategy. The second containing an accurate presentation of the company’s financials. As a result of poorly written plans and summaries, the timing to funding is greatly extended.
The next time a client asks you about timing to fund his project, the correct answer is, ‘that’s entirely up to you”.
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