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Lenders vs. Investors

Lenders vs. Investors. Lenders: often bankers, make loans, do not want to bear risks, expect repayment over specific period of time, do not enjoy benefits of a project

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Lenders vs. Investors

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  1. Lenders vs. Investors • Lenders: often bankers, make loans, do not want to bear risks, expect repayment over specific period of time, do not enjoy benefits of a project • Investors: provide equity to a project, expect a higher return than lenders, benefit from a project’s profits, take more risks - but not risk-takers, play a role in project management

  2. Why Do Investors Invest? • Produce income.In a particular pattern. • Achieve capital growth. With or without time constraints. • Enter a market. And thereby avoid start-up costs and market research. • Sell a product. Especially capital goods. • Form a partnership. And thereby grow quickly.

  3. Why Do Lenders Lend? • To build relationships with clients who will be a future source of business • Enter new business areas to expand portfolio profitability and find a competitive advantage • Contribute to economic and social growth thereby stimulating greater lending activity Note: that most banks separate project finance from corporate finance save time and learn the interests of banks in advance

  4. What Do Lenders and Investors Look for in Projects? • Strong entrepreneur and project team • Solid project fundamentals and plan • Risk assumption and mitigation • Clear legal and regulatory structure • Country stability • Financial viability • Exit mechanisms

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