Joint Venture Financing

Understanding Joint Venture Financing

Due to circumstances, sometimes, you may not qualify for a conventional loan to finance your project. In such a situation, joint venture financing is an ideal option for you. If you are looking for a credible company to fund your venture, ABG International Inc has a solution for you.

In this guide, you will get a lot of insights regarding joint venture financing. Let’s dive in and see!

Joint Venture Financing Meaning

Joint venture financing is done through an affiliation where parties agree to share risks, rewards, and capital of the venture. Unlike a partnership, a joint venture relates to a particular project that is being conducted by the parties.

Joint Venture Financing Agreement

A joint venture agreement stipulates the rules and procedures regarding the governance of the venture. The agreement outlines the relationship between the two parties showing the terms and condition under which the undertaking is created.

Key Features of Joint Venture Financing

As an investor or entrepreneur, it is crucial to familiarize yourself with the features of joint venture financing, as explained below.

  • The lender covers 70%-100% of the costs except for professional fees.
  • To qualify for the facility, you must have a profit margin of at least 25%.
  • Depending on your country, you must meet a minimum project cost. However, there is no upper limit.
  • Profit, loss, risks, and capital are shared on a case by case basis.
  • Net profit is shared between the two parties.

Joint Venture Loan Application

A joint venture loan application can only be made when you are ready with all the requirements. To apply for the loan, you must fill the form with the following details.

  • Your business name
  • The particulars of your directors
  • The financial statements of your business
  • The Particulars of your project costs
  • Your procurement method

Financing a Joint Venture

Joint venture financing is meant to cover all purchases and costs of the project. Lenders may charge interest on funds drawn and divide the profit with the developer or not charge interest but split the earnings equally with the developer.

Joint venture financiers prefer working with experienced developers who are likely to complete projects within two years. Specialized financial institutions grant the financing under more stringent requirements than commercial mortgages.

For more information about joint venture financing, please contact ABG International Inc.