Risk Sharing by Partners

Risk Sharing by Partners

Working in a new project/business can come with lot of risks, since only the success of the project/business can get back the investment made in the same.

When the investment required goes beyond the provided levels, comes the question how to bring in the required funds. This can happen through various methods, like loans from the financial institutions, from the market, the contacts of the promotors, pledging or liquidating some of the assets of one or more of the promotors.

It can even go to the extent of staking everything, and beyond. In that case it is better to have a clarity how the availed loan or facility is going to be paid back/covered. The person/s handling pressures from the creditors, or those handling day to day projects may borrow on their personal risk, which should be avoided, and if cannot be avoided, should be only for a very short term of just a few days, else, the promotor who borrowed will be facing the music from the same creditors who came to his rescue, if the project does not become a success, or is not paid on the commited dates.

He will have only himself to blame if proper arrangements are not made for the credit taken during the time of crisis timings in the project. It better be understood that all the partners should be trusted completely, but, when it comes to the question of stakes, more so in high risks, better be in proportion to their holdings in the firm/company.

There is absolutely no point in feeling cheated by the partner/s after everything is over. Hence a clear planning or understanding be in place before the transaction takes place.

When the project becomes successful none of the stake holders compromise on their share of the pie, but when it fails, every one(or most of them) ducks for cover leaving either the brave ones or those who borrowed on behalf of the firm/company to face the music.

Just ensure that proper back up for fail proof repayment planning is in place before any financial risk is taken.