Step 1: Preparing to Attract Project Financing
At this stage, you need to do the following:
Select the appropriate banking and financial products that best suit the needs of your project.
Identify credit institutions that could become your potential partners and conduct preliminary negotiations with them. It is important to make a list of banking organizations that you can contact for financing. In doing so, it is worth considering such factors as the bank's experience in lending to your sector, whether it has a Pension Fund department, the amount of possible financing and the cost of the bank's services.
Preparing documents for the initial analysis in a credit singapore business email list institution includes not only legal and financial papers, but also the following materials: a project presentation (investment memorandum); a business plan that describes in detail the project budget, its structure and financial model.
Stage 1 Preparation for attracting project financing
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At this stage, you need to actively engage with the bank to determine the financial covenants that will be used to monitor the project. It is important to make sure that they are feasible for the business, and even better, if there is a reserve for unforeseen circumstances. This is especially important, since these covenants will later become restrictive conditions in the loan agreement.
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Step 2: Obtaining a preliminary loan decision (Term sheet)
At this stage, the following tasks need to be completed:
Provide the selected banks with the information and documents about the project prepared in the first stage. It is important that negotiations with these organizations are conducted at a higher decision-making level and accompanied by a presentation of the project, which increases the chances of continued cooperation.
Bank representatives, based on the provided data, evaluate the attractiveness of the project, the validity of its plans and forecasts, market prospects, and expected financial results. If the internal credit policy department of the banking organization approves the project, specialists will prepare preliminary terms of project financing.
By receiving preliminary terms of a project finance loan from banks, you will learn the interest rate, loan amount, term, collateral requirements and other important parameters on which the bank is ready to support your project. These terms are the basis for further work with the loan. After receiving the first offers, it is recommended to contact at least three banks to have a choice in case of unforeseen difficulties or changes.
Competition between credit institutions helps to get better conditions, as they try to offer you the most advantageous offer so as not to lose a client.
Step 3: Receiving a final loan decision
At the stage of obtaining a final credit decision, several tasks must be completed:
First, agree on the preliminary terms of the loan with the bank. In some cases, it is necessary to sign a protocol of intent. This process can take from 1 to 6 months, as it requires careful consideration of all the conditions that will be set out in the document:
A list of key project participants, which may include not only the lender, initiator and borrower, but also the general contractor, the main equipment supplier, key clients, engineering organizations and other counterparties.
The intended purpose of funding and the conditions for its provision.
Loan amount, currency, interest rate, term and repayment procedure.
List of collateral for fulfilling loan obligations.
List of guarantors.
Rights and obligations of the parties to the transaction.
Provision of guarantees and assurances.
Requirements for insurance and hedging risks.
Conditions under which the bank will approve the loan. The lender creates a list of possible risks, and each of them must be eliminated with the help of documents or certain actions.
Creating a "road map" for the Pension Fund. Based on the approved conditions, a plan for preparing the necessary documentation is created and agreed upon with the bank. This is required to obtain final approval of the loan. The following documents may be included in this list:
Documents that give permission to begin implementing an idea.
Design documentation with the necessary expertise.
Building permit.
Concession agreements and documents on state support.
Financial and legal documentation about the company initiating the project, the borrower, the investor and related parties, as well as the key partners of the project.
Market analysis results.
Documentation required to implement the project, including equipment purchase contracts, construction agreements, engineering contracts and other related papers.
Documents confirming the participation of the initiator and/or investor in the project, including the conclusions of independent appraisal organizations, if the contribution is in the form of property.
An agreement with a sponsor that defines its obligations to finance the project.
Any other documents specified in the conditions under which the final decision will be made.
Preliminary review of the application. All listed documents are transferred to the bank. Based on this data, the financial model is recalculated, covenants are updated and the necessary changes are made to the business plan.
Step 3: Receiving a final decision on the loan
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Analysis and examination of the documents provided. Third-party specialists are involved for this purpose. The examination covers several areas:
assessment of the economic and political stability of the region;
verification of legislative and legal aspects of the transaction;
financial analysis;
technical and construction analysis (in large projects, the bank often involves construction and engineering specialists, since bank employees usually do not have sufficient knowledge in these areas).
During the analysis, aspects may be identified that the bank considers problematic and require additional justification and elimination. After this, a final credit decision will be made.
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