When a company is in debt, it must pay a fixed amount of interest on schedule. In this way, when the operation is in good condition, the return on capital is much higher than the lending rate, and the lending operation can bring higher income to the company, and the shareholders of such companies can also get higher remuneration. But if the business situation is not good, or even a loss, the company still has to pay this interest. As a result, the company's earnings have fallen even more, and shareholders have also suffered losses. In this way, due to different financing methods and different capital structures, it brings financing risks to the company and shareholders. This kind of risk is not inevitable for every company, but depends on the business strategies of different companies. Therefore, financing risk is an unsystematic risk and an avoidable risk. [ 1]

Chinese name

Financing risk

Foreign name

Financing risk

meaning

Risk of income change caused by financing activities

Expression type

credit risk

Expression type

Completion risk

quick

navigate by water/air

Risk analysis, risk causes and various risks

introduce

definition

Financing risk is affected by operational risk and financial risk.

Expression type

Types of financing risks

1, credit risk. The credit risk faced by project financing refers to the risk that project participants cannot fulfill their agreed responsibilities and obligations. Like banks that provide loan funds, project sponsors are also very concerned about the reliability, professional ability and credit of all participants.

2. Completion risk. Completion risk refers to the risk that the project cannot be completed, postponed or fails to meet the expected operating standards after completion. Project completion risk exists in the project construction stage and trial production stage, and it is one of the main core risks of project financing. The completion risk means the increase of interest expense, the extension of loan repayment period and the missed market opportunity for the project company.

3. Production risk. Production risk refers to the technical, resource reserve, energy and raw material supply, production and operation, labor conditions and other risk factors existing in the trial production stage and production and operation stage of the project.