Project Financing and market capital

 

The solution to the problem of financing the creation of innovation is to use various sources of financial resources, both public and attracted to the market capital.

Public funding can be in the form of:

direct financing of fundamental research and applied development, carried out on the principles of program-targeted management on a competitive basis (programs, grants, pilot projects, etc.);

indirect financing of innovative projects in the form of tax incentives, accelerated depreciation, concessional lending*, etc.

Direct budget allocations are made on the basis of a combination of two forms of direct support: in the form of basic financing of a scientific organization and in the form of competitive distribution of funds for fundamental and exploratory research (grant system1) and the implementation of tasks of state scientific and technical programs (system of contracts).

Market ways to raise funds for innovative projects imply the following options for covering costs by:

own funds of the executing organization, including from the development fund, depreciation fund, reserve fund to cover temporary current losses, equity capital placed in the authorized capital of the company;

attracted funds of shareholders-founders (shareholders) received through the issue and distribution of securities;

borrowed funds, in particular, loans from commercial banks and foreign investors (for example, the World Bank, the European Bank for Reconstruction and Development, international funds, etc.) on various principles of repayment (for example, participation in profits, provision of a share, etc.), funds from the placement of bonds of the enterprise on the stock markets;

combined financing, for example, direct investments of funds of domestic and international organizations, financial institutions of various forms of ownership and individuals in accordance with the legislation;

mortgage - a type of pledge of real estate (land, enterprises, structures, buildings and other objects directly related to the land) in order to obtain cash loans, etc.

leasing, i.e. obtaining from the lessor production assets (machinery, equipment, transport, computing facilities, industrial facilities, etc.), as well as intellectual property rights (licenses, computer programs, know-how, etc.) with their subsequent redemption by the lessee. Leasing is a form of off-balance sheet financing2, in which the debt obligations of the enterprise do not increase. Leasing schemes allow the introduction of expensive equipment without large capital investments, the contract may provide for a provision on the right of the lessor to temporarily use the sold machinery and equipment, after receiving all the cost or part of it to transfer to the lessee.

venture financing based on the principle of financing relatively small and unrelated projects in the expectation of a return on investment with a high rate of return on invested capital without any guarantees or collateral 17, p.122. The difference between venture capital investment and conventional bank lending is that risky enterprises do not have to return the funds invested by them to venture capital firms.

As evidenced by foreign experience, venture capital investors are characterized by the following features: participation in the management of the company, "growing" a new company for subsequent sale, a phased allocation of long-term investments, making high demands on the invested company, its management and employees.

A type of venture financing is a trust - as a method of trust management of the investment system, used by some domestic investment funds.

Each of the methods and sources of financing has its advantages and disadvantages. It is therefore necessary to develop alternatives based on a combination of different forms of financing. Important is the possibility of budget financing, maintaining a balance between long-term borrowed funds and share capital. The higher the share capital, the lower the debt obligations and the higher the gross profit before taxes are paid. The higher the share of debt financing, the higher the interest payments on liabilities will be. In each project, the implications of different funding schemes and modalities should be carefully assessed.

Findings

Innovative activity is based on the implementation of projects. A project is a set of activities aimed at achieving a clearly formulated goal. At the same time, as a rule, the goal has a unique character, and its achievement is associated with resource constraints.

The most widely used term is "investment project", which refers to any project for the implementation of which investments are made. In recent years, the term "innovative project" has often been used, the main purpose of which is the creation and use of innovations (new technologies, products, products, organizational solutions, inventions, know-how, etc.). A significant share of the results of the implementation of the innovative project are intangible assets. An innovative project, the implementation of which is almost impossible without investment, is also an investment project, but at the same time it has the following features:

• the goal of the project is to create innovations;
• the project is characterized by a high degree of uncertainty in achieving the goal;
• the project is focused on achieving long-term goals;

involvement in the implementation of the project of unique resources (primarily specialists inclined to creative activity;

during the implementation of the project, there is a high probability of obtaining unexpected, representing independent commercial value, intermediate and final results.

Initially, the project is usually presented in the form of a business plan containing a description of the project and a justification for the effectiveness of its implementation. The main purpose of preparing a business plan is to attract the investment necessary for the implementation of the project.

Sources of financing innovative business are diverse: direct and indirect state financing and market methods of attracting investments (loans, own funds, leasing, etc.). Each fundraising option has its advantages and disadvantages, and the choice of option requires their careful evaluation.