Financing the project involves choosing some methods of paying for the costs associated with its implementation, as well as identifying sources of investment with their structure. This method acts as a way of attracting resources for investment in order to ensure the implementation of the selected project.
Methods of financing
- self-financing, investing only at the expense of its own resources;
- corporatization and other types of equity financing;
- lending by banking institutions, as well as issuing bonds;
- financing from budgetary funds;
- a combination of the various forms of financing mentioned above;
- project financing.
This is a method that needs to be given more attention in this article, since in the economic literature one can find diverse views on the question of its composition. One of the main differences is the definition of this term. With all the diversity of its interpretations, it is necessary to distinguish a narrow and broad definition:
- Wide interpretation suggests the following formulation. Project financing is a set of methods and forms of providing money for the implementation of various developments. In this case, this concept is considered as a way of mobilizing different sources of resources with the integrated use of appropriate methods by which the project is financed. Also, it can be allocated cash resources, which are sent only for strictly defined purposes within the framework of a particular investment development.
- Narrow definition: project financing is a method of providing resources to certain areas of activity, characterized by a way of repayment of such investments. It is based on only those cash incomes that are generated by the investment project. Also for this interpretation is characterized by an optimal distribution of the risks of the parties involved in its implementation, interrelated with this project.
Sources of allocation of monetary resources
Any financing of the enterprise and its projects is a monetary resource that can be divided into own capital (internal), as well as borrowed and attracted capital (external). This article will consider the main forms of such sources in accordance with the objectives of financing specific investment projects.
Such financing of the enterprise can be used only in the implementation of small-scale developments. And capital-intensive projects that require additional investments are mainly financed from additional sources.
External financing is the use of sources such as the funds of various financial institutions and non-financial organizations (state, population and foreign investors), additional contributions from the founders of the business entity. This investment is carried out through the mobilization of raised funds in the form of equity financing and borrowed resources through the attraction of credit financing.
Sources of additional funds attraction: advantages and disadvantages
When implementing various investment projects, a financing strategy should be justified, an analysis of all possible methods and sources of financing should be carried out, and a careful development of a scheme for the use of additional funds to pay for all costs associated with this line of business should be carried out.
- the necessary amount of investment in the implementation of the developed project both in the total volume and at each individual stage of its implementation;
- optimization of the composition of financial sources;
- maximum reduction of capital expenditures and risks of the project itself.
Financing of education
Education is a fairly important branch of society, requiring additional funding in certain amounts. Its sources are:
- budgets of different levels;
- provision of paid services in the field of education;
- scientific activities of such institutions with subsequent implementation of its results;
- implementation of entrepreneurship of these organizations, not related to scientific activities and education.
Turning to the statistics, it should be noted that today municipal and state funding for education occupies about 3% of GDP, and about 2% of GDP comes from the funds of business entities and the population.
Financial and investment strategy of the organization
This concept presupposes the existence of a set of specific decisions that cover priorities, choices and magnitudes of the use of various sources of additional resources. Such financing is a means aimed at solving technical, marketing, social and management strategies. At the same time, the central place is given to the marketing strategy, which essentially induces other components of solutions in other areas (technical, managerial and social). However, these areas of decision-making can be implemented autonomously.