Performing due diligence on a project before business loan or venture capital funding is a necessary step of the funding process. We understand when our Clients have concerns about paying Due Diligence Fees. We also understand that if the project requires that due diligence be performed before funding can take place -- then that is exactly what needs to happen. When Clients deny a Funding Source the opportunity to investigate the financial soundness of the transaction then the deal stops there.
Clients are required to pay for the costs of verifying and confirming the information provided by a Client. The Project Corporation works with sophisticated investors that do their best to keep from funding bad deals. Therefore, they have to take steps to confirm the accuracy of the information. When funding a project can be accomplished without due diligence fees, we are excited as you.
We appreciate that most Clients are truthful, have extensive experience, and have verifiable information. Many Clients have appraisals, audited financial statements, and third party opinions about their projects. However, you would never go to court and use the other guy’s attorney. In financing projects, our Investors require that they have an opportunity to verify the Client’s information before writing a check. It costs money to verify the information, to fly to the Client’s location, along with travel expenses, attorney fees, accountant fees, and have individuals who have expertise in that field to consult with the investor. The Client is required to cover all these costs.
When you apply for a home mortgage, you do not expect the mortgage company to pay for the appraisal. That is a cost the Client must absorb. There are also fees for credit checks, and loan origination. It is not very likely that a Client looking for business loans or venture capital will have a deal as easy to do, or has less risk, than a home mortgage. Therefore, it is logical to expect to pay appropriate fees. A Client always has the opportunity to verify the creditworthiness of the Investor before paying any fees.
In fact, we encourage this. The more comfortable the Client is, the more successful we will be in putting together a deal which will benefit the Client’s company, and make it more profitable. Due Diligence Fees are only paid when both sides are comfortable with the project, and there is clear understanding of the costs of moving forward.
Real Funding Sources
do not charge fees just to put the money in their pocket. The Funders that The Project Corporation works with have the capital to invest in others, they don’t need to con a Client out of money, and put up with the
headaches that would come with that situation. However, The Project Corporation cannot guarantee that a Funder
will not find something during their due diligence that will undo their enthusiasm of moving forward with funding the business loan or providing venture capital.