Ever-increasing energy requirements, volatility of fossil fuel prices together with an increased focus on the importance of preventing global warming and pollution has spurred investments in application of green technologies, especially in energy production. Unfortunately, since there are very few precedents to go by, governments as well as financial institutions and investors continue to grope in the dark regarding optimal financing of green projects, and of ways of effectively monitoring their financial performance. The capital requirements of green projects can be quite unique when compared to conventional industries. It often translates to a situation where the cost of servicing the debt starts to cripple the project itself. This requires appropriate financial intervention to save projects from turning turtle.
What Does Green Finance Entail?
Green projects involve a combination of technology and financial investment models that use solutions that are market-oriented, but attempt to put into place environmental integrity that balances the energy requirements of the planet. Green finance is especially directed at projects that save on the consumption of conventional energy by employing alternative energy sources such as solar, hydropower, wind, tidal or biomass. This is expected to have both short and long-term benefits for the environment. The policy behind the distribution of green finance uses economic as well ecological parameters for best impact. Learn more on green project finance by clicking here.
What to Do If Green Projects Run Into Financial Distress?
The essential principles of financial management remain the same for business as is for individuals. You need to take a hard look at the expenses that you are incurring, stop obvious haemorrhaging, and plan for the immediate rather than long-term subsistence. This might involve difficult steps like laying off manpower that is not critical to the operations and management, taking pay cuts to lessen the demand of funds, stricter inventory control, and curtailing any non-essential expenditure. If the situation is really critical, the business-owner or top-management should be seeking professional financial counselling for advice on how to restructure and reduce debt that might be crippling the cash flow.
Use Debt Relief to Get Back Control
Earlier, the only route for businesses that were unable to service and repay their debt was to declare insolvency, very much like a bankruptcy filing by an individual. Business owners can now seek the advice and assistance of corporate debt relief companies who will be able to offer a number of solutions to alleviate the situation. With the help of debt relief companies, it is possible to negotiate with the company’s creditors for a number of possible actions. These might include restructuring of the debt like allowing more time for the debt to be repaid or allowing a debt repayment holiday for an adequate time that will enable to the company to get back on keel. The debt relief company may also be able to negotiate a more attractive interest rate on the outstanding or even write off a portion of the debt. This will make servicing the debt more practical for the company and be even essential to protect the entire debt from being classified as non-performing.
Why Debt Relief for Green Finance Works Better?
Typically, green finance is extended by a government, financial institution or even a company belonging to the more developed countries to a company in the less-developed economy. While the recipient of the funding is definitely the prime beneficiary, the impact of the green finance extends to even the developed world. In such cases, harsh debt recovery measures are seldom implemented and instead all the players are normally willing to restructure the debt to enable the company make a success of the venture.This stance is due to the belief that such favourable actions will help to positively affect the environment and also impact favourably on their goodwill.