Introduction > Develop Project Plan > Assess Feasibility > Identify and Select Finance Source/Instrument > Mitigate Risks > Secure Permits and Approvals > Seek Project Funding/Finance > Structure and Close Financing > Case Studies > Acknowledgements
Step 6: Seek Project Funding/Finance
After completing the preliminary work to demonstrate that the project is bankable, developers are ready to seek funding or financing for the project. This process includes determining the project’s eligibility for the selected financial instrument and developing a high-quality proposal. The proposal is crucial for securing funding. A comprehensive and tailored proposal highlights the project's strengths and addresses potential risks and regulatory requirements, demonstrating to potential funders that the project is bankable and capable of delivering the expected returns.
Best Practice Activities for this Step
Determine eligibility
Ensure that the project meets eligibility requirements of a specific funder:
- Applicant eligibility. Funders may define the type of entity eligible to apply for funding. For example, multilateral development banks may require that only national governments, not municipalities, apply for infrastructure funding, or grants may be restricted to non-profit organizations. National government participation is required when multilateral banks need a sovereign guarantee. However, in some cases, subnational entities can get funds directly without sovereign guarantee if they demonstrate creditworthiness and financial autonomy.
- Project eligibility. Funding sources often define the type of project or cost eligible for funding. For example, funding may be available for construction, but not operations.
Develop high-quality proposals
A high-quality proposal will demonstrate technical and financial viability, drawing on the results of Steps 1-5 of the Framework. Your proposal should leave reviewers with a clear sense of the objectives, requirements, and outputs of a project. Proposal reviewers seek to ensure that the project is worth undertaking and that the entity submitting the proposal is the best organization to undertake it. Key elements of a high-quality proposal include:
- Project overview. The proposal should clearly describe the development and operation of the planned project, costs, available funding, and the gap for which the project developer is seeking funding. Information developed in Step 1 should be the basis for the project description.
- Recoverable products and potential uses. The proposal should include the production potential for recoverable products (e.g., biogas, electricity, digestate, compost, nutrients) and potential uses and markets for those products.
- Land, facilities, and equipment requirements. The proposal should include details about the land use requirements, as well as site plans, applicable engineer drawings, and project construction schedule.
- Permitting requirements. The proposal should identify all the permits needed to execute the project plan and provide evidence that the developer has either applied for or obtained the permits.
- Project cost estimate. There should be an adequate level of detail on the project cost estimates, including capital costs (e.g., land acquisition, site preparation, digester construction, equipment), as well as operation and maintenance costs (e.g., feedstock pre-treatment and handling, labor, and monitoring).
- Financing plan. The viability of the project in the long term needs to be emphasized in the proposal. The financing plan should describe anticipated revenues, payback period on the initial investment, internal rate of return, cost-benefit analysis, and net present value of the investment (see Step 1).
- Operations and maintenance plan. The proposal should include a plan that demonstrates that the applicant will properly operate and maintain the project. This plan should provide details on the safe operation of the equipment and demonstrate that there will be sufficient staff with the specific skill sets to operate the equipment. In addition, the plan should provide details on the required maintenance of the site and the equipment (see Step 2).
- Qualifications of the project developer. The proposal needs to establish the qualifications of the applicant to develop the project, operate it successfully, and meet the funder’s requirements. Past performance information can indicate ability to successfully execute the proposed project. An applicant that has partners should also describe the process of selecting the partner and their qualifications. For example, a municipality may seek funding for a private entity to construct a municipal facility. In such cases, the application needs to clearly articulate the qualifications of the construction firm or the mechanism for selecting it.
- Mitigation of risks. Funders understand that there are risks involved in any project, and often favor proposals that anticipate potential risks and develop plans to mitigate them. The analysis illustrated in Step 4 can inform this section of the proposal.
- Social impact assessments (SIAs) are essential for large organic waste management projects seeking funding from certain sources. SIAs analyze the positive and negative impacts of the project on the community, including job creation, gender equality, health benefits, and overall social well-being, and propose strategies to avoid, reduce, or compensate for negative impacts and to enhance positive outcomes. SIAs involve engaging with potentially affected communities and other stakeholders to gather their input and ensure their concerns are addressed.
The information gathered in the previous steps is crucial for developing a comprehensive project proposal. Various elements of the proposal build upon activities from the initial Framework steps (1-5). For example, the applicant can use details included in the project scope from Step 1 to develop the project overview. Similarly, the information on recoverable products and potential uses will be derived from the feasibility studies, a best practice covered in Step 2. The section discussing potential risks and mitigation measures should include insights from Step 4. Additionally, the details on necessary project permits and the plan to obtain and submit them, as recommended in Step 5, are essential, given that most organic waste management projects require permitting. Additional potential elements of a proposal, such as return-on-investment analysis, impact analysis, or copies of pre-agreements, will depend on the requirements of the funding source or financial instrument. This aspect is discussed in Step 3, which illustrates how easy or complex it is to secure the financial instrument based on the ease-of-access parameter.
Tailor proposals to the requirements of the potential funder
Tailor the proposal to meet the specific requirements of each potential funding organization. Depending on the type of funding selected, additional analysis and studies may be required. Some funders may also require the proposal to include copies of pre-agreements for feedstocks and offtakes. Below are some elements a proposal must include for selected financing instruments:
- Private equity: may require demonstration of return-on-investment analysis.
- Loans: may require demonstrated assets of at least 20 to 30 percent of the financing sought, in addition to a feasibility study, a business model, and signed pre-agreements for feedstocks and offtakes.
- Public financing: may require assessment of the benefits to the community or the environment.
- Development bank funding: may require proof of gender equity and fair labor practices.
Key Tools/Resources Related to this Step
Risk Analysis Checklist for Biogas Projects
U.S. Environmental Protection Agency
2023. You can use this checklist as guidance for developing high-quality proposals.
Financing Readiness Questionnaire for Municipal Solid Waste Sector
Climate and Clean Air Coalition
2018. You can use this questionnaire as guidance for developing high-quality proposals.
Anaerobic Digester/Biogas System Operator Guidebook
U.S. Environmental Protection Agency
2020. This Guidebook offers best practices for the operation and maintenance of biogas projects. You can use this resource to support the development of an operations and maintenance plan.
Landfill Gas Project Development Handbook
U.S. Environmental Protection Agency
2021. Chapter 8 of this Handbook discusses best practices for landfill gas collection system operation and maintenance.