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Solaranlage

What opportunities do renewable energy and real estate project companies have to obtain capital for their investment project?

SMARTeFunding@OwnMisssion

This is how companies raise capital today as an alternative to bank financing!

Project companies for renewable energies and real estate are confronted with the question of how to raise the required capital as part of their financial planning. The first way is to talk to the bank to apply for a loan for the project. Here, companies increasingly meet with rejection, because according to Basel III, the appropriate equity capital cannot be contributed.
What does Basel III mean when borrowing via a bank?
As a result of the Basel III banking regulation introduced in 2014, financing over a certain percentage of the loan-to-value ratio has become significantly more expensive for institutions. After the expansion planned for 2022 (Basel IV), this will become even more painful for credit institutions. The share that the credit institutions contribute to the total investment volume for project development with their classic loans will fall continuously as a result of the Basel reforms.
This means that banks have to meet much stricter requirements when granting loans. The applicant´s equity capital plays a much greater role in financing than in previous years. Thus, 30% of the total financing amount must be contributed from equity. If the company fails to do so, the bank will be less and less able to grant a loan due to the Basel reforms.
Does this mean that companies cannot start a new project if they do not have enough equity?
The good news is that companies can make up the equity gap with mezzanine equity. Through an investment project, the missing amount of capital is paise through crowd investing. Although this is debt capital in the true sense of the word, in balance sheet terms it is recorded as equity. In this way, private investors also have the opportunity to invest in interesting projects that are normally only available to institutional investors.
Why can mezzanine capital be recognized as equity in the balance sheet?
In economics, equity is that part of a business entity’s capital which is shown in the balance sheet as a positive difference between assets and liabilities, so that equity corresponds to net assets. An equal definition assumes that equality is available to business entities for an unlimited period and is therefore not subject to any repayment obligation.
In business administration, debt capital is capital that is made available to a legal entity (company or local authority) by its creditors on a fixed-term and repayable basis or originates from internal financing (accruals).
Mezzanine capital is a collective term used to describe types of financing which, in their legal and economic form represent a hybrid between equity and debt capital. In the classic variant, economic or balance sheet equity is provided to a company without granting the capital providers voting of influence rights or residual claims like the real shareholders.
Conclusion: A healthy financing mix between debt-equity and mezzanine capital is the optimal financing structure and strengthens project companies in their negotiating position vis-à-vis their banks.
An equity issuance privilege is a worthwhile option. Under our SMARTeFunding@OwnMission processes, project companies can raise capital through the placement of subordinated assets or securities digital mezzanine capital.
What is the best fit for you now? What can you do?
If you need to raise capital as part of an investment project, we can help you with our SMARTeFunding@OwnMission processes based on the SMARTeFunding@Software-as-a-Service (SaaS) software solution. We provide you with the means to digitally raise mezzanine capital online and implement your entrepreneurial project.

Project companies for renewable energies and real estate are confronted with the question of how to raise the required capital as part of their financial planning. The first way is to talk to the bank to apply for a loan for the project. Here, companies increasingly meet with rejection, because according to Basel III, the appropriate equity capital cannot be contributed. What does Basel III mean when borrowing via a bank? As a result of the Basel III banking regulation introduced in 2014, financing over a certain percentage of the loan-to-value ratio has become significantly more expensive for institutions. After the expansion planned for 2022 (Basel IV), this will become even more painful for credit institutions. The share that the credit institutions contribute to the total investment volume for project development with their classic loans will fall continuously as a result of the Basel reforms. This means that banks have to meet much stricter requirements when granting loans. The applicant´s equity capital plays a much greater role in financing than in previous years. Thus, 30% of the total financing amount must be contributed from equity. If the company fails to do so, the bank will be less and less able to grant a loan due to the Basel reforms. Does this mean that companies cannot start a new project if they do not have enough equity? The good news is that companies can make up the equity gap with mezzanine equity. Through an investment project, the missing amount of capital is paise through crowd investing. Although this is debt capital in the true sense of the word, in balance sheet terms it is recorded as equity. In this way, private investors also have the opportunity to invest in interesting projects that are normally only available to institutional investors. Why can mezzanine capital be recognized as equity in the balance sheet? In economics, equity is that part of a business entity’s capital which is shown in the balance sheet as a positive difference between assets and liabilities, so that equity corresponds to net assets. An equal definition assumes that equality is available to business entities for an unlimited period and is therefore not subject to any repayment obligation. In business administration, debt capital is capital that is made available to a legal entity (company or local authority) by its creditors on a fixed-term and repayable basis or originates from internal financing (accruals). Mezzanine capital is a collective term used to describe types of financing which, in their legal and economic form represent a hybrid between equity and debt capital. In the classic variant, economic or balance sheet equity is provided to a company without granting the capital providers voting of influence rights or residual claims like the real shareholders. Conclusion: A healthy financing mix between debt-equity and mezzanine capital is the optimal financing structure and strengthens project companies in their negotiating position vis-à-vis their banks. An equity issuance privilege is a worthwhile option. Under our SMARTeFunding@OwnMission processes, project companies can raise capital through the placement of subordinated assets or securities digital mezzanine capital. What is the best fit for you now? What can you do? If you need to raise capital as part of an investment project, we can help you with our SMARTeFunding@OwnMission processes based on the SMARTeFunding@Software-as-a-Service (SaaS) software solution. We provide you with the means to digitally raise mezzanine capital online and implement your entrepreneurial project.

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