What is Project Finance?
It is the financing (financing) of longer-term infrastructure projects, industrial projects as well as public services with the non-recourse or limited recourse finance structure. The equity and debt that are used in financing the venture is returned by the cash flow that is generated from the projects.
The project financing structure is borrowing structure that primarily depends on the cash flow generated by the project to repay, and the project’s assets, rights and other interests being used as collateral secondary to the project. Project finance is particularly appealing for the private sector due to the fact that companies can invest in large projects off balance sheets (OBS).
Project loans cater to corporate borrowers seeking funding for capital expenditure, covering the expansion of production facilities and procurement of fixed assets like land, buildings, machinery, and equipment.
Key Takeaways
- Project finance is the public financing of infrastructure as well as other capital-intensive, long-term projects.
- It is often the non-recourse or limited recourse financial structure.
- A person who has an unrecourse loan can’t seek any further repayment beyond the forfeiture of their asset.
- Project debt is usually located in a sufficiently minor subsidiary that is not being consolidated in the balance sheets of individual shareholders (i.e. it is an off-balance sheet expense).
Project Financing Procedure
The client provides the Project Feasibility Study Report (FSR) together as the Detailed Project Report (DPR)/Business Plan and Project Financial Modelling Workbook to us for review and review by our finance team. If we are satisfied following our review of the specifics, we’ll provide our Terms and Conditions for the provision of Project Finance Services.
When the client is satisfied with our Terms and Conditions, he must sign it and sends it back to us.
After the client has accepted the Term Sheet by the customer, the due diligence process will be carried out by the financiers/investors at their own expense (Please take note that a huge budget investment or finance can will be brought to a conclusion by one investor or financier one-on-one. In this scenario there could be many financiers/investors involved. In this case, we may initiate a loan/equity syndication procedure, with an additional charge for the customer.
When the client is satisfied with our Terms and Conditions, he must sign it and sends it back to us.
After the client has accepted the Term Sheet by the customer, the due diligence process will be carried out by the financiers/investors at their own expense (Please take note that a huge budget investment or finance can will be brought to a conclusion by one investor or financier one-on-one. In this scenario there could be many financiers/investors involved. In this case, we may initiate a loan/equity syndication procedure, with an additional charge for the customer.
If due diligence is successful following due diligence, the client can be able to sign or an Joint Venture (JV) Agreement with investors or a Loan Agreement(s) with the individual lender(s) and/or Investor(s).