What are the main distinctions between project finance, trade finance and venture capital? They all have much in common, especially at first glance. Most sources of capital specialize, so it is helpful to know what type of capital best fits your fundraising situation. This article compares their respective differences and similarities.
While project and venture finance are usually longer-term (3+ years), trade finance combines working capital lines of credit (where capital is typically paid back within 6 months). Both project and trade finance usually require insurance or other guarantees, with trade often handled through an export credit agency.
All three types require careful documentation of the uses for proceeds, and each involves various strategies for reducing or eliminating risks. Your team’s track-record and operating history are important, but even startups, “greenfield” projects, and initial trade can gain support with the right planning and preparation.