Project Finance

  • These are most commonly known as non-recourse loans, which are secured by the project assets and paid entirely from project cash flow, rather than from the general assets or creditworthiness of the project sponsors, a decision in part supported by financial modeling.
  • Term Loan/Project Loans are normally granted for part funding capital assets/purchase of fixed assets     either for setting up of industrial units/Commercial ventures, or Infra projects. Term Loans shall also be granted on standalone basis or for expansion of existing units/commercial ventures & also for its diversification.
  • Basic purpose of Term Loan is for part funding the Capital cost/fixed assets/project assets.
  •  The financing is typically secured by all of the project assets, including the revenue-producing contracts.
  • Project lenders are given a lien on all of these assets and are able to assume control of a project if the project company has difficulties complying with the loan terms.
  • Generally, a special purpose entity is created for each project, thereby shielding other assets owned by a project sponsor from the detrimental effects of a project failure. As a special purpose entity, the company has no assets other than the project.
  • Capital contribution commitments by the owners of the project company are sometimes necessary to ensure that the project is financially sound or to assure the lenders of the sponsors’ commitment. Project finance is often more complicated than alternative financing methods.
  • The loan is sanctioned depending on the reliable credit source, nature of the industry and credibility in the market.
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