Project Finance and Recovery From COVID-19 (Essay Sample)
For this assignment, you will write a 6-8-page paper answering the questions listed below in an essay format. Well-written papers will provide a complete, yet concise overview of the topic and address all the key points outlined below in the assignment details. This paper is an excellent opportunity for you to develop a solid understanding of the principles of project finance.
Learning Connection:
This paper is directly linked to the following key learning outcomes from the course syllabus:
Differentiate between corporate and project finance
Identify the key characteristics of project finance
Identify the key characteristics of project finance
Identify the choices that a firm faces when structuring the capital of a project organization
Explain why established large organizations use project financing
Assignment Instructions:
For this assignment, you need to write a 6-8-page paper that answers the following key topical question:
How can project finance help businesses recover from COVID-19?
Sections you may want to incorporate in your paper include the following:
Introduction
A Short History of Project Finance/Theoretical Background
The Impact of COVID-19 on Business Growth
Risk Sharing Through Project Finance
The Advantage of Forming a Consortium
Choosing a Financial Structure
Reducing Cost of Capital for the Corporation
Reinvesting Retained Earnings to Drive Growth
Reorienting the Organization Towards Sustainability
Conclusion
Please note that these are prompts for you to consider within your paper. Your paper should be written as an essay with topical headers; it should not be formatted in a Q&A format. These sections represent the minimal items that you would want to address. From your readings and your lectures, you will be exposed to other topics that may be relevant to the paper, and you would do well to consider those in writing the essay. Additionally, you are required to cite at least two sources outside the course materials in writing this paper. As part of my evaluation process (see attached rubric), papers which cite peer reviewed sources as opposed to general websites or articles are considered a higher quality of source.
Below are some key guidelines you will want to ensure you follow in writing the paper. Think of this list as a quality control checklist, along with the attached grading rubric.
Paper is 6 - 8 pages in length
Include a title page and reference listing, but do not count your title page and reference listing as part of the 6-8 pages of content we are expecting.
Paper format complies with APA 6 or 7 guidelines (e.g., Time New Roman (12 points font) and double-spaced with 1-inch margins on all sides).
If you are unfamiliar with APA 6 or 7 guidelines, please review the sample paper at the following link: https://owl.purdue.edu/owl/research_and_citation/apa_style/apa_formatting_and_style_guide/documents/20200128APA7ProfPaper.pdf
Also, you will find additional resources listed in the syllabus
No more than 15 percent of paper is comprised of outside sources or direct quotes
Paper fuly addresses the five topical questions listed above
Paper is not written in a Question and Answer format but makes appropriate use of headers and formatting in compliance with APA 6 or 7 guidelines
Paper evidence reflection of the individual author relative to the broader discipline
The Paper is free of grammatical errors
Paper is submitted by the DUE DATE.
Project Finance and Recovery From COVID-19
Student’s Name
Department, Institutional Affiliation
Course Code: Course Name
Instructor’s Name
Due Date
Project Finance and Recovery From COVID-19
Project finance is a non-recourse, limited recourse funding method for firms off the balance sheet. It requires a company to use cash flow from the project to repay the debt or equity. Sponsors use revenues generated from the project to pay the loan. In project finance, lenders consider the project’s assets the loan’s secondary collateral. Project finance enables enterprises to fund initiatives off the balance sheet without increasing sponsors’ debt burden. It can aid struggling businesses in mitigating potential investment risks and raising funding cost-effectively to benefit investors and sponsors. Thus, project finance is a crucial tool for helping enterprises recover from COVID-19 through non-recourse, off-balance-sheet financing that is relatively cheaper and less prone to investment risks than traditional modes of funding.
Short History of Project Finance/Theoretical Background
Individuals and companies have historically employed project finance to fund long-term initiatives. The concept of project finance first emerged in the thirteenth century. Project finance was first documented in 1299 when the English Crown borrowed a loan from the Italian Frescobaldi to fund the Devon silver mines’ exploration and development (Raikar & Adamson, 2020). In more recent history, governments utilized project finance to support the construction of the Panama Canal, the Trans-Alaskan pipeline, and the North Sea oil field infrastructure (Raikar & Adamson, 2020). Today, project finance applies to many sectors, including energy and other core infrastructural projects such as tunnels, bridges, and toll roads (Raikar & Adamson, 2020). Governments and companies have historically used project finance to fund the construction of hospitals and nursing homes (Raikar & Adamson, 2020). Technology and telecom companies have also deployed project finance to build data centers and erect cellphone towers. As a discipline, project finance has developed into two primary sub-categories, including public project finance and infrastructure finance, each with an eco-system comprising financial institutions, consultants, sponsors, and advisors (Raikar & Adamson, 2020). The last two decades have seen growing international project finance as an economic investment instrument. This interest emanates from this technique’s ability to alleviate investment risk and attract lower costs than other forms of financing. Therefore, project financing can help struggling firms raise cheaper funding without incurring high investment risk.
Impact of COVID-19 on Business Growth
COVID-19 had devastating impacts on business growth. It increased businesses’ financial fragility and hampered the capacity of firms to generate enough revenues to fund growth initiatives. COVID-19 caused a massive dislocation of businesses due to reduced demand, rising employee health concerns, growing supply chain disruptions, and closures due to stringent lockdown measures (Bartik et al., 2020). The COVID-19 pandemic prompted the government to institute strict social distancing restrictions, culminating in significant demand shifts that inhibited business growth (Fairlie, 2020). The number of active business owners in the United States plunged by 22 percent due to
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