Project financing mainly depends on the future cash flow of the project itself and the assets formed, rather than relying on the credit of the project investors or sponsors and assets other than the project itself to arrange financing. So what are the financing methods of the project? The following are the main ways of project financing that I have sorted out.

ABS mode

ABS (Asset-backed Securitization) refers to asset-backed securitization. Specifically, it is a project financing method that is based on the assets owned by the target project and secured by the future income of the project assets, and raises funds by issuing bonds in the international capital market. Its purpose is to make the original projects with low credit rating still enter the high-grade securities market through its unique way of improving credit rating, and to greatly reduce the cost of raising funds by issuing bonds by taking advantage of the characteristics of high credit rating, high security and liquidity and low interest rate.

(1) Operation process of ABS financing mode. Mainly includes the following aspects:

1) Set SPC. That is, the establishment of special purpose company SPC (Special Purpose Company). The institution can be a trust and investment company, a credit guarantee company, an investment insurance company or other independent legal person, and should be able to obtain a higher credit rating (AAA or AA) from an international authoritative credit rating agency. As SPC is the carrier of asset securitization financing, the successful establishment of SPC is the basic condition and key factor for the successful operation of asset securitization.

2)SPC is combined with projects. That is, SPC looks for objects that can be used for asset securitization financing. Generally speaking, as long as the assets attached to the investment project can bring cash income in a certain period of time in the future, ABS financing can be carried out. It can be future real estate rental income, future aircraft and automobile operation income, export trade income of project products, future aviation, port and railway freight income, toll roads and other public facilities income, taxes and other financial income. The enterprise (project company) that owns this future cash flow becomes the original owner. The assets represented by these future cash flows are the material basis of ABS financing methods. In ABS financing, we should generally choose the project assets with stable and reliable future cash flow and less risk. When SPC carries out ABS financing, its financing risk is only related to the future cash income of the project assets, and has nothing to do with the risk of the original owner of the construction project.

3) Credit enhancement. By means of credit enhancement, this group of assets can obtain the expected credit rating. Therefore, it is necessary to adjust the existing financial structure of the project assets, so that the project financing bonds can reach the investment level and meet the requirements of SPC for signing ABS bonds. SPC promotes credit by providing professional credit guarantee.

4)SPC issues bonds. SPC directly issues bonds in the capital market to raise funds, or through SPC's credit guarantee, other institutions organize to issue bonds and use the funds raised by issuing bonds for project construction.

5)SPC repays debts. Since the original beneficiary of the project has transferred the future cash income right of the project assets to SPC, SPC can use the cash inflow of the project assets to pay off the principal and interest of its bonds issued in the international high-grade investment securities market.

(2) The difference between 2)BOT and ABS. BOT and ABS financing methods are both suitable for infrastructure construction, but their operating characteristics and economic impact are quite different. The main differences are as follows:

1) The difference between operational complexity and financing cost. BOT mode is complicated and difficult to operate. The adoption of BOT mode must go through the stages of project determination, project preparation, bidding, negotiation, document contract signing, construction, operation, maintenance and handover. , involving government concessions, foreign exchange guarantees and many other links, involving a wide range, not easy to implement, and its financing costs have also increased due to many intermediate links. The operation of ABS financing mode is relatively simple. It only involves the original owners, SPC, investors, securities underwriters and other subjects, and does not need government franchising and foreign exchange guarantee. It is a financing mode that mainly operates through non-governmental channels. It not only simplifies the operation, but also reduces the financing cost.

2) Differences in project ownership and operation rights. The ownership and management right of BOT project belongs to the project company during the concession period, and the ownership will be handed over to the government at the expiration of the concession period. Therefore, financing infrastructure projects through foreign BOT can bring advanced foreign technology and management, but it will give foreign investors control over the project. Under ABS mode, during the issuance of bonds, the ownership of project assets belongs to SPC, while the decision-making power of project operation belongs to the original beneficiary, who is obliged to pay the cash income of the project to SPC. After the bond expires, the debt and interest are repaid with the income generated by the asset, and the ownership of the asset returns to the original owner. Therefore, using ABS to finance international infrastructure projects can keep the host country in control of project operation, but it can't gain advanced foreign technology and management experience.

3) Differences in investment risks. BOT project investors are generally enterprises or financial institutions, and their investment can't be given up and transferred casually, so each investor bears a relatively large risk. The investors of ABS project are bond buyers in the international capital market, which greatly disperses the investment risk. At the same time, this kind of bond can circulate in the secondary market, which reduces the investment risk through credit enhancement and is very attractive to investors.

4) Differences in the scope of application. BOT is the intervention of non-government capital in the field of infrastructure, and its essence is the privatization of BOT projects during the concession period. Therefore, some key departments related to the national economy and people's livelihood cannot adopt BOT. ABS is not like this. In the process of bond issuance, although the asset ownership of the project belongs to SPC, the decision-making power of the project still belongs to the original owner. Therefore, there is no need to worry about important projects being controlled by foreign investors when using ABS. For example, ABS mode can be considered for major infrastructure projects such as important railway trunk lines and large power plants that cannot adopt BOT mode. Comparatively speaking, ABS mode is more widely used than BOT mode in the field of infrastructure.

The meaning of project financing

1. Direct financing mode

Direct financing mode: refers to a way in which project investors directly arrange project financing and directly assume corresponding responsibilities and obligations in financing arrangement. According to the different needs of shareholders, it can be divided into centralized form and decentralized form. As the simplest financing method, direct financing has the advantages of flexible arrangement of financing structure and lower financing cost. At the same time, we need to pay attention to how to limit the recourse of loan banks to investors.

2. Financing methods of the project company

There are two main forms of this model: single project company model and joint venture project model. Compared with the latter, the former reduces the direct risk of project investors and plays a role in sharing risks. At the same time, the former is more complicated to operate than the latter. Generally speaking, the financing mode of the project company lacks flexibility in the arrangement of tax structure and the choice of debt form.

3. Leveraged lease financing model

It refers to a financing mode in which under the arrangement of project investors, the assets of the project are purchased by the asset lessor in a leveraged lease structure and then leased to the lessee. This model has many advantages, the most prominent of which is that it can enjoy the benefits of pre-tax rent and the debt repayment is more flexible. At the same time, due to the large number of participants, the operation of this model is complicated and the flexibility of rescheduling financing is poor, which brings certain limitations to investors.

4. Facility use agreement financing mode

As the name implies, this model refers to the agreement between the provider of a certain facility or service facility and the user of this facility with the nature of "payment regardless of delivery". The project he requested to be completed is irreplaceable, and the completion of this financing model needs to be supported by a perfect agreement, and there must be a strong market supervision department to implement rewards and punishments.

5. Product payment financing mode

This model takes the ownership of the products produced by the project and its sales income as collateral, rather than adopting the way of transfer and mortgage. This makes the price and sales volume of products relatively stable and the income relatively guaranteed. It should be noted that product payment is only the transfer of property rights, not the transfer of the product itself.

Types of project financing

1. According to the nature of financing.

(1) equity fund

(2) Debt funds

2. According to whether it is classified by financial institutions.

(1) direct financing

(2) indirect financing

3. According to the financing terms.

(1) Long-term funds

(2) Short-term funds

Main characteristics of project financing

Compared with traditional financing methods, project financing has the following characteristics:

1. Exclusivity of financing subject.

Project financing mainly depends on the future cash flow of the project itself and the assets formed, rather than relying on the credit of the project investors or sponsors and assets other than the project itself to arrange financing. The exclusiveness of financing subjects determines that creditors are concerned about how much of the future cash flow of the project can be used for repayment, and its financing amount and cost structure are closely related to the future cash flow and asset value of the project.

2. Limitation of recourse.

In traditional financing methods such as loans, creditors pay more attention to the credit and real assets of project borrowers while paying attention to the investment prospects of the project, and the right of recourse is complete; As mentioned above, the project financing method is project-based. Unless otherwise agreed with the signatory, the creditor cannot recover any form of assets other than the project itself, which means that the project financing depends entirely on the future economic strength of the project.

Extension: negotiation skills about financing process

First of all, we must understand that the investors we face are different. More often, we will face multiple investors at the same time. Their backgrounds, preferences and knowledge structures are different. So their concerns and ways of asking questions are different. Therefore, there is no skill in negotiation. The "skill" I'm talking about here is actually a psychological preparation process. In this process, we can increase. ?

First of all, in a few minutes, the best way to introduce is to find the right one (in the industry, examples of success or failure). Talking about each other will make it very easy for them to understand what you are doing. At the same time, it also examines how well investors know your field. At the same time, you should tell each other your position in the market, including early or late, annual sales, market share and so on. Of course, the most important point here is that you can immediately distinguish the difference between you and your competitors to strengthen your project advantages.

Second, don't say too much descriptive language when introducing yourself. Use a few points to locate and let the other party know clearly what you do and the situation of the enterprise. If you think from the perspective of investors, it will be easier to catch their attention. Because every investor will receive many business plans and meet many people, the key is how to distinguish you from others. Then, tell each other the future development plan. At this time, investors will use their own investment strategies to position themselves. If it meets, it will naturally start to be interested.

Third, how much do you want? This question must have been put forward by investors first, which is a skill. Everyone knows that the last bidder is the most valuable. Although there are detailed capital usage quotas and financial analysis in the plan, investors will ask you. If he doesn't ask, don't emphasize how much money you want, but emphasize your advantages and his income. ...

Miracles come from accumulation and need to do small things constantly. Meeting with investors often leaves only one impression, so further follow-up is needed. In fact, investors' time is very limited. If you are willing to spend time with you, it will be great good news for you. If an investor is unwilling to spend anything on you, it means that he is not interested in you. If investors are willing to talk to you, you should receive them well, handle the relationship well, let investors know more about you, and move forward to the core issues of the enterprise more and more.

5. The core problem of an enterprise is financial forecast, such as business model, team, existing market form, competitive environment, customers, income and profit in the next three to five years, etc. Financial forecast reflects the business model and profit model, and at the same time, investors should believe that they can really achieve this goal. The way for investors to evaluate an enterprise is very simple: one way is the price-earnings ratio method, which multiplies the value of the company by the PE value through the future profit forecast. The normal PE value is about 10 to 15. If the enterprise grows very fast, the PE value will reach 30, 50 or even 1000. Will use this to estimate the minimum value of the enterprise. On this basis, the investors' association will form an internal report to predict how much the company will be worth in three years and how much it can earn by investing now. Knowing how they evaluate the commercial value of your project (enterprise) will help you to negotiate actively.

6. To understand the language system of venture capitalists, we must realize that their "language system" is different from that of investors. Entrepreneurs often talk about things that investors don't pay attention to.

Investors like to ask several questions: What is the core value of your idea? What value can it bring to customers? Why can you do it? Where is the core competitiveness? Entrepreneurs should think clearly about these problems and know how to express them in refined language.

About core values. Many business models are not the initiative of entrepreneurs. For example, I often contact some entrepreneurs in the IT industry, and they entrust us to help write business plans. However, as far as this big environment (industry) is concerned, since everyone wants to do this, what's your brilliant idea? Why do you think you can do better than others? The answers to these questions are the expression of core values, not the rhetoric of the model itself. There is also the question of "customer value". Any product will only be used by others if it brings value to others. Don't talk repeatedly about how you are addicted to and love this thing, which is unconvincing.

Seven, another common mistake is that only the goal is mentioned, but there is no action plan or action plan. In fact, whether you must achieve the goal of "China first" is not important, but how to break it down. Even if the goal is not so ambitious, it makes people feel that you can get closer step by step. The ability to approach the goal is the core competitiveness of entrepreneurs. Lack of core competitiveness is the main reason why many schemes are rejected.

Eight, don't doubt investors, don't hide your core part, if you are worried, in case of financing failure, whether everything I just said has exposed business secrets. Many entrepreneurs I meet have this mentality. They want you to help write a plan or recommend an investment institution, but they are worried that you will copy and steal his business secrets. He just kept stressing: "My model is unique and the profit is high. If you are interested, let's talk about it. If you are not interested, let's not waste each other's time ... ". First of all, investors will not make any decisions or attitudes without knowing the details of the project. In addition, such an entrepreneur can only make investors feel that he has no core competitiveness, and his business plan must be highly reproducible, otherwise he will not be so insecure. If you want to start a business, but you are still so timid, you'd better not try again. I can tell you for sure that you have no chance at all. ...

Nine, many entrepreneurs in the process of financing, it is easy to show the mentality of being fooled (or being played by VC), worried about the passive situation of future cooperation, and worried that they will eventually be eaten by VC. In fact, these are only caused by the ignorance of VC by the project party. The purpose of VC is to make money, and it will not be naive to the extent of "hurting the partners who make money for him"; In addition, in the early stage of starting a business, I suggest that entrepreneurs should read at least one book, Company Law, to learn more about the operation mode of joint ventures or cooperative companies and let themselves know their rights. In addition, it is suggested to collect some information about VC before looking for VC, at least to understand his investment methods and processes. In this way, during the negotiation, you won't talk about the topic of "self-defense", and VC won't feel that you don't trust or understand them. Therefore, entrepreneurs should not be at a loss when they are in contact with VC, especially when they first come into contact. They always think about how to save their own problems and make themselves

Ten, in the early planning of the project, or during the negotiation process, the entrepreneur should keep his initiative and the bottom line of cooperation, and don't over-sell his due interests and rights in order to obtain funds, otherwise the investor will not eat you, because he has decided to give up the investment. Many project parties asked me how many shares should be transferred in the business plan. We have no money, and the technology stocks can't reach the shareholding. In fact, when the financing plan was originally designed, the project party was already misplaced. It's not that you are raising money for cooperation, but that you are transferring shares to attract funds. The meaning of the two is different. The former is like friends working together, fighting for their respective rights and interests without starting to invest, while the latter, entrepreneurs are active. Before attracting VC, we owned 65,438+000% of the shares. Now I just shift a little to attract.

Eleven, there are some conversation skills, which are also very meaningful in negotiations. For example, try to ask and answer questions. Investors don't ask a question, you explain a lot of questions, they don't ask a lot of questions, you answer. The best way is to give a clear answer to whatever he asks. In addition, try to leave room when asking questions, for example, don't ask "Do you have any questions?" Instead, you should ask, "Do you have any questions?" ; Also, don't think that "caution" is your advantage. In front of VC, don't ask them directly about the company, such as: "May I know your successful investment case?" Or "May I check the source of your company's funds? Wait, if you are really interested in these questions, please find out through other channels after you leave. After all, VC is a human being, and no one likes to be suspected like this. Also, at the end of the negotiation, there is generally no obvious result, and more is to let you wait for news. Don't ask at this time, "What do you think are the chances of my project getting your investment?" Not to mention, "I hope to give me an answer as soon as possible, because there are still many investment companies inviting me. "Otherwise, all efforts in the negotiation process will become a thing of the past.

12. At present, the domestic capital market has just started, and there are still many irregularities, especially some intermediary companies, and there are a lot of illegal operations and even fraud. However, whether you have been cheated in the past or not, don't say anything when you meet new investors, otherwise the atmosphere of the negotiation will be destroyed by you. You can take your past experience as an experience to remind yourself when negotiating with the new VC. Don't make the mistake of doubt, because once VC realizes it, your caution will become insincere. If during the negotiation, VC puts forward the trick that you were cheated in the past, you just need to say euphemistically, "Oh, I contacted similar investment institutions in the early stage, but then they had problems. I want to know, how does your company handle this kind of problem? " That's good. In one case, he will seriously answer and dispel your concerns. In another case, he will run into a nail, be caught cheating, and dare not do anything.

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