3 WAYS TO RAISE MONEY FOR PROJECT DEVELOPERS!

7 February, 2022

QUICK SUMMARY

Fund raising for project
A place for everyone at RiA
What we can do for you

ARTICLE

How do you fund your project? This is a topic that we are dealing with on a daily basis in our case because we are a clean energy engineering company, but also a media platform. And on our engineering side, we obviously work on commercial industrial projects basically providing clean energy solutions to businesses. The projects are fully funded meaning there is basically no upfront cost to our clients at the start.

For the purpose of this piece, we are going to talk about 3 ways of raising money. However, there are other methods. They include:

-convertible

-equity

-mezzanine

CONVERTIBLE

It’s actually a promise for future equity. Let’s imagine you want to develop a small solar project somewhere, for example in Togo. You promised your client that you are going to provide a fully funded solar solution for them. This implies that they are initially not going to pay any coin. So one way you could raise finance for the project is employing a convertible. It means that you need to find another financier that you know. It may be a wealthy individual, an entrepreneur or a company. You can therefore sign an agreement with the company that finances the project. The lender in exchange gets equity on the project. That’s why I say it’s a promise of future equity. This works a lot, especially when you’re starting a project, meaning that you may not already have the structure in place but you need some capital to get things going.

One of the advantages of this method is that it is usually quite cheap and fast. You don’t necessarily need to have a lawyer in place. You can agree between yourselves. The two participating parties however need to sign the agreement. The signed document must be very clear on the amount of money being lent to the borrower and how much the lender is to expect. You need to also understand how much you are selling from the company. This is because sometimes at the beginning of the project, one can be sometimes so desperate to get money to get the project going. The business needs to be careful to avoid selling a lot. To sum it up, you simply acquire money to finance the project in exchange for equity.

EQUITY

When you have already set up the structure and still need some money, you may approach an individual to finance the final parts of the project. When you go for direct equity, it is a slow and quite expensive process because you require lawyers. Here, you are simply exchanging a piece of your company for money. The main difference between convertibles and equity is that for convertibles, you don’t necessarily have an entity in place. The lender gives you money to kick start the project and that you promise them some equity later which usually happens very fast whereas for this case, the entity is already in place and there’s an in depth discussion about equity and the document of agreement will be drafted by a lawyer.

MEZZANINE

It’s a hybrid form of financing. A lender such as an individual lends you money with the condition that if you are not able to pay back the money at an agreed point in time, they may convert the debt into equity. In short, The borrower gets money to finance the project giving the lender the right to convert the loan into equity at an agreed future.

It is cheaper to adopt your own company first. It is then that you have equity. This is because the return is lower for the debt. Normally, when raising money, lenders tend to determine current interest rates. If we consider Europe, it is a single digit, around 5%-6% while in developing nations, it goes as high as 15%. As a result, you see a lot of investors asking for about 15-20%.Another advantage of building your own company first is that it allows the investor to trust you since you have collateral plus it shows commitment.

A PLACE FOR EVERYONE AT RiA

One of our primary goals at RiA is sustainability. We are doing our part to achieve the set SDGs by 2030. The beauty of RiA is that we have a part to play for everyone. For individuals who want to venture into solar energy entrepreneurship, we have the Solar MasterClass. Simply take the course at the comfort of your home online. During the last quarter of last year, we worked with GOOGLE to produce a FREE SUSTAINABILITY MASTERCLASS for businesses.

For businesses that are experiencing high energy costs and unreliability, we provide fully funded solar solutions across the globe. Feel free to get in touch to check out our completed projects together with those on going across the African Continent. Our fully funded solar solution will enable your business to cut energy costs by at least 15%. We act with speed in delivery and it only takes us 3 months to set up.

In addition, during this month of love, we are hosting a FREE BUSINESS SEMINAR for all businesses. It is during this seminar your business will get in touch with leaders in the field. If your business needs to go green or reduce energy costs but you are not sure where to begin, RiA is here for you. We are ready to walk with you in the energy transition period. You will also learn the following during the webinar;

The Five Stages of the Sustainability Journey.
Solar Solutions for Commercial and Industrial Sector
Implications of Net Zero Policies for businesses
Africa Corporate Impact Champions

In the world of today, knowledge is vital for both individual and organizational growth. Renewables in Africa (RiA) keeps you updated on trending clean energy issues across the globe through our media platform. We are also hired by multinationals to help disseminate clean energy information via our media platforms and Webinar moderation. At RiA, we do what we say and live up to the promise we give our clients. If you are an individual or a business/company planning to transition to clean energy, our door is opened for you. We will walk with you. Email us at tony@renewablesinafrica.com and live to tell our story.