Types, structure, analysis of sources of financing investment projects

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

One of the general aspects of the economic development of the Russian Federation at the present stage of society's life is the existence of an innovative economy. The solution of the problem associated with increasing activity in the field of innovation has a double reflection if we consider the issue at the level of individual structures. On the one hand, the innovative activity of the Russian economy is formed from the projects of different companies. This raises the level of its competitiveness. On the other hand, innovations are an important tool in the competitive struggle for individual enterprises and organizations both in the international and domestic markets. In our article we will talk about the investment needs of projects and sources of their financing. Let's analyze the classification, structure of sources, and analyze them in detail.

Subjects of financing investment projects. Methodology

Under the sources of financing of investment projects, it is necessary to understand the funds applicable as investment resources. It is worth noting that at present a lot depends on their competent choice. This is the viability of investment work; distribution of income received from it; a kind of guarantee of financial stability to investors. From the sources of financing of investment projects, as well as certain investment methods, a single system is being formed. It should be added that behind each method there is a real market entity.

Among the ways to invest, it is important to note the following:

• Credit.
• State.
• Combined.
• Self-financing.

Market Entities:

• Securities exchanges.
• Commercial banking structures.
• Budgets of different levels.
• Businesses.

Classification of funding sources

It should be borne in mind that all named entities can be investors. And the sources of financing of investment projects are:

• Investor's own financial resources (depreciation; profits; savings, savings of individuals and legal entities; funds that are paid by insurance structures as compensation for losses from all kinds of accidents). It must be remembered that any commercial organization today must analyze the structuresources of financing investment projects, as well as to identify certain trends, their causes in case of negative third-party interference in the process.
• Borrowed funds from investors or resources transferred by them. A striking example here is budgetary or bank loans.
• Investor funds raised. We are talking about money received from the sale of shares, as well as due to contributions - for example, shares - of citizens, members of labor collectives and legal entities.
• Funds of the extrabudgetary plan.
• Federal budget funds, which can be provided both on a returnable and non-refundable basis, as well as the budget capital of the constituent entities of the Russian Federation.
• Money from foreign investors.

Types of sources of financing for investment projects

Funding of investments in facilities and construction projects can come from one or a number of sources. Currently, they are classified into:

• Budget (centralized) - funds from the budget of the federal or local level, as well as the budgets of the constituent entities of the Russian Federation.
• Extrabudgetary (decentralized) - all the rest (borrowed money raised from extrabudgetary funds, own funds of structures, individual developers, investments from foreign capital). It should be noted that today the use of attracted sources of financing of investment projects in the territory of the Russian Federation is not predominant.

Structurefunding sources

The economic system does not develop and does not exist at all without the formation and subsequent use of investment resources. It is the solution of the issue related to their search that makes it possible to increase the efficiency of the functioning of the economy. In the economic literature, the sources of financing of investment projects are usually classified in accordance with three areas: own, loan, borrowed. It is worth noting that they can be expanded by adding budget investments, as well as charitable and free contributions.

Any source of financing for an investment project may have certain components, volumes, role and significance. In each new case, they will differ significantly in terms of return, availability, payment and efficiency.

Own sources of investment

It is advisable to consider separately our own sources of financing investment projects and the mechanisms for their application. Economic growth depends on the structure and volume of investments in the national economy. In addition, the state should take an active part in the investment process, regulating, stimulating and directing it. Further, we take this into account and analyze the fundamental possibilities and actual problems of the main sources of financing for investment projects and the mechanisms for their use. Today, the material basis for the process of expanded reproduction anywhere in the world is the self-financing of structures. In other words, financing of investments of an economic entity is realized, as a rule, at the expense of its own sources: depreciation of fixed assets, profits and reserve funds. At the same time, the new formation's own funds are considered internal, while loans and borrowed funds are external sources of financing investment projects.

What are the challenges?

It should be borne in mind that the possibility of using the profit of the structure as one of the main sources of accumulation is becoming more difficult due to the increase in the number of unprofitable companies, the huge volume of non-payments, as well as the desire of businessmen to minimize profits or not disclose them at all in order not to make payments taxes. An analysis of the situation proves that the main sources of financing for investment projects are our own. Profit is considered a key internal tool for creating financial investments. It provides the existing direction of the company's strategic development.

It is at the expense of profit that the company is able to pay taxes, form consumer and reserve funds, and accumulate investment resources in order to fully develop economically. It is worth noting that the last part of the company's profit is the main source of financing for investment projects by definition. Resources forinvestment, which is created from the profits of the firm, is revealed in the process of its distribution in accordance with various purposes.

The choice of a source of financing for an investment project largely depends on the capabilities of the structure and external circumstances. The second means of self-financing is the depreciation of those assets of the enterprise that are long-term. Therefore, the most important tool for regulating activity in terms of investment is the depreciation state policy.

Depreciation policy

Efficiency of the depreciation policy, first of all, is determined by the degree to which the economic processes taking place in fact are taken into account when justifying the current depreciation rates. An important role is played by the balance, the timeliness of their change. Deductions from intangible assets and fixed assets used by the company are a more permanent source of investment resources, especially when it comes to structures with a significant amount of assets. Through the use of various depreciation methods, the company can control the formation of depreciation flows. The enterprise has the right to independently choose the method of accelerated or linear depreciation of fixed assets for production purposes.

Which sources of funding are more important?

As it turned out, attracted sources of financing for investment projects play a secondary role, and their own come to the fore. That is why there is a need to create appropriate prerequisites, the key of which are the following:

• Improve the circulation of funds.
• Noticeable improvement in financial discipline and financial condition of companies.
• Replenishment of working capital.
• Improving the policy in the field of taxes and fees, its primary focus on the foresight of fiscal factors for the work of economic agents, as well as on ensuring stability. Differentiation of the principles of taxation existing today to stimulate the processes of accumulation and savings.
• Rationalization of financial flows and capital investment in the real sector of the economy.
• Formation of conditions under which structures will operate as market entities.

Analysis of sources of financing for investment projects

Attraction of any source of investment financing is associated with certain costs for the structure. For example, the issue of new shares involves the payment of dividends directly to shareholders, the receipt of a loan - the payment of interest on it, the use of leasing - the payment of remuneration to the lessor, and so on. Therefore, when analyzing, it is necessary to identify the price of various sources of financing and determine the most profitable of them.

It is worth noting that the only potential means of financing FIG investments at present are bank loans. Government-designed policies over the past few years have had an indirect but extremely strong impact on incentives andthe possibility of financing financial-industrial projects of financial-industrial groups by banking institutions. In regulating the economy, one of the most important areas of influence on the political priorities of banking structures has recently been to attract funds from financial organizations in order to finance the state deficit. budget. It should be noted that high rates of alternative profitability hinder the development of lending and investment by banking institutions in the industry, where it is advisable to include investment projects of the financial and industrial group.

The second most important factor hindering the development of this activity is the ever-increasing insecurity of contractual obligations in the domestic economy. Looking at the situation just once, one might erroneously conclude that the opportunistic behavior of bank borrowers is in no way related to regulatory government activity. Nevertheless, a more detailed analysis indicates that the bad faith of economic agents in the performance of contracts is largely provoked by certain actions on the part of the state itself. In any case, the practice that has developed over many years and is associated with the lack of protection of the interests of investors and creditors is a significant obstacle to increasing the role of bank investments and loans in financing investment projects of the financial and industrial group.

Final part

So, we have fully considered the varieties, the structure of sources of investment financing, as well asanalyzed some of them. In conclusion, it is worth noting that the approach to the issue discussed in the previous chapter makes it possible to separate the analysis of financing decisions from the analysis of investment decisions. By the way, only after calculating the net present value of the project, you can analyze each source of funding separately.

It must be borne in mind that in order to justify any investment project, a business plan is formed, which reflects the essence of the current issue, the role of the project in overcoming it, the expected effect of putting the idea into action, funding sources, and so on. If the project option is accepted, the analysis of its implementation is carried out by comparing the indicators in fact with the values provided for in the business plan.

In the final part, it is advisable to analyze and automatic analysis. According to it, according to a pre-created algorithm, a detailed study of all financial and economic aspects of a project that requires investment is carried out, starting with the terms of financing and ending with an assessment of the viability of the project as a whole, indicating the negative features of its implementation. It is worth noting that the analysis can be carried out both for the entire project and for some of its sections. The procedure is carried out in a graphical version. The analysis is accompanied by text comments. It must be added that all the information indicated in it can be used for the initial design of the project. In addition, it is on the basis of the analysis that it is possible to identify weaknesses in the production plan of the project, and therefore -the risk level of the respective investment.

Only as a result of the analysis, developers can form a number of alternative versions of the idea (for example, with different sources of funding, different structure of production or investment costs, etc.). In addition, in the mode of such an analysis, the program independently offers a brief conclusion related to the assessment of key performance indicators. If there is a discrepancy with the accepted methods, she will suggest the most effective ways to eliminate them.

Finally, the financial plan ends with a description of the sources of financing for all calendar periods of the project, as well as an analysis of the financial condition of the company and the effectiveness of investments in the future.