Question

are we using government programs to assist with funding for capital project? bank and lenders for construction project?

Answer 1

Government funding is required to complete the capital project. Capital project are those project which requires intensive capital investment like setting up a plant, refineries etc. It's sometimes difficult for bank to arrange so huge fund and generally involves very high interest rates. Thus, capital projects seeks government programmes for it's funding at local, provincial or federal level. These programmes are based on achieving diverse objectives such as economic development, rural development, green building etc. There is a limit of securing the government granted fund, for that often matching fund must be secured in advance before seeking government fund.

We use bank and lenders for funding to construction project as bank will able to grant loan to the construction projects as these loans are for short term. Sometimes to construct a building needs bank guarantee on the project. Banks charge high interest rate for funding to these project as there are chances of getting default in repayment of loan amount.