Frequently Asked Questions on Project Funding

 

What is the meaning of Project Finance?

Project Finance is the financing of long-term, industrial projects, infrastructure projects, or public services using a limited recourse financial structure. Project financing addresses the funding requirements for the exclusive project. We can say that in Project funding, the project itself is collateral. When the project is completed, the revenue generated by it will be used to repay the loan. Project financing relies on the project’s cash flow for repayment, with the project’s assets, rights, and interests held as secondary collateral.

 

What are the characteristics of Project Finance?

• Non-recourse Financing

Non-recourse financing means that the borrowers and shareholders of the borrower have no personal liability in case of monetary default. Any recourse the lender may have will be limited primarily or entirely to the project assets if the project company defaults on the debt.

• Project Finance Documents

Project financing requires a detailed project report. This is the most important document to take the proposal ahead. 

• Many Project Participants 

As Project Financing is generally used for the long term, big scaled projects, several project participants are involved. This is helpful for the smooth running of the project financing process. Financial institutions don’t want to be in a position where the failure of one project or one borrower is large enough to cause their failure. Thus, having several project participants is useful. 

• Capital-Intensive Projects 

Project financing involves large amounts of funding because it is generally used to fund major international development and infrastructure projects. Thus, project financing finances capital-intensive projects.

• Special Purpose Vehicle 

The SPV (Special Purpose Vehicle) checks the proceedings of the project and also maintains a line of sight at the assets. After the completion of the project, asset allocation is processed with regard to the Special Purpose Vehicle which monitors all the processes.

• Revenue from the completed project used for Repayment

In Project Financing, the cash flow that the project generates after completion is used to repay the loan.

What is the importance of Project Finance?

In the past few years, global interest in Project FInancing as a tool for economic investment has increased. Project finance helps finance new investment by structuring the financing around the project’s cash flow and assets, without any additional sponsor guarantees.  Project Financing thus alleviates investment risk and raises finance at a relatively lower cost while benefiting the sponsor and investor. 

• Retains Confidentiality 

Financing projects through Project Finance enables the sponsors to retain the confidentiality of vital information regarding the project which is going to be financed and helps them to keep up with the competitive market through competitive advantage.

• Extending the debt capacity 

The debt may not fall on one lending institution or investment firm due to the presence of multiple entities. So the debt capacity increases due to syndication in Project Financing. 

• Free Cash Flow and no conflicts 

Through Project financing, the providers of funds manage the free cash flow that is left over after paying the operational and maintenance expenses and other statutory payments. The project company has a finite life and is limited to the project there are usually no conflicts of interest between investors and the management of the company. 

Project Finance process/ How do you get Project Funding?

Step 1) Pre-Financing 

• Identification of the Project Plan 

In this stage, the lender primarily ensures that the project plan is aligned with the goals of the financial services company. This step includes identifying the strategic plan of the project and analyzing whether it’s reasonable or not. 

• Check and Minimise Risks 

The lender should check the risks involved in the project and if the project has the resources to avoid any risks. Risk management is essential before the lender begins the Project FInancing venture. 

• Analyze the Project Feasibility 

When a lender decides to invest in a project, he should check if the project is financially and technically feasible. This can be done by analyzing several factors in the project.

Step 2) Financing 

• Arranging Finances 

Financing the Project is a crucial part. The sponsor should get a loan from a financial institution whose objectives and goals are in line with that of the project. 

• Negotiation of the Loan

Negotiating is an important part of Project Financing. The lender and the borrower negotiate the funding until they reach a unanimous agreement. 

• Documents and Verification  

The terms and conditions of the loan have to be mutually decided by the lender and the borrower. Once they decide on the terms of the loan, then the documentations take place. 

• Disbursement of the Loan

The borrower receives the funding as and when the negotiations are done and the documentation is completed. 

Step 3) Post-Financing

• Monitoring of the Project 

As the work for the project begins, the project has to be monitored in a timely and organized manner by the project manager. 

• End of the project and Repayment 

After the project has been finished, it is necessary to keep track of the cash flow from its operations. This is because the funds from the cash flow and revenue will be used to repay the project funding.

  

Why Terkar Capital for Project Funding?

At Terkar Capital, we provide consultation for all kinds of investment banking and capital funding. We believe in supporting and creating opportunities for SMEs and large businesses across India. The objective of the company is to reach sectors of MSMEs that are not organized and financially excluded. The goal is to make finances available at a reasonable cost and deliver transparently.

How to qualify for a business loan in India?

 

FAQs to qualify for a business loan in India

Business loans are loans taken by businesses or corporations without collateral. These loans are convenient for businesses to manage emergency monetary requirements. The procedure to get Business Loans in India is easier and quicker. Thus your loan will be sanctioned faster. Here are some frequently asked questions by our customers:

What are Business Loans?

Businesses today face several challenges. One of those challenges is the requirement of collateral for getting a loan from financial institutions. Many small and medium-scale businesses today do not have collateral for loans. These businesses can take a Business Loan. An unsecured business loan is given solely upon the creditworthiness of the businessman borrower. To be eligible for an unsecured business loan, the borrower should have a good credit rating, a good credit history, and a good cash flow.

Why should you take a Business Loan?

• Helps your business grow at a faster pace

By taking a business loan your business can grow at a faster rate. You can also finish any stagnant projects or ventures with the help of a business loan.

• The value of the loan is not dependent on the collateral

When applying for a secured loan, the amount of the loan is dependent on the collateral being used. But while taking an unsecured loan, you may get a bigger amount of money because the lender is making decisions on the basis of your cash flow, credit profile, the health of your business, and so on.

• Faster Disbursement of Loans

As a business loan does not require collateral, the disbursement of the business loan is faster. The financial institution checks your documentation, proposal, and track record and then sanctions the loan. Less paperwork is required for unsecured business loans.

• Repayment in EMI

You can repay the business loan in the form of EMIs. The interest rate will be applied to the EMIs over the term of the loan.

• No risk to your assets

An unsecured business loan is a loan where no collateral is necessary. Thus, all your assets are safeguarded from any risks.

Eligibility Criteria for Business Loans

The Eligibility criteria for a business loan may differ depending on various financial institutions and the situation of the business. Here is a list of the general eligibility criteria for a business loan:

1. The business must have its previous year’s financials duly audited by a CA.
2. Borrowers must have a good credit rating in order to qualify for an unsecured business loan.
3. The business should have a vintage of at least 2 years.
4. The business needs to have its Income Tax returns filed for at least the past 1 year

How do you get a Business Loan in India?

Business Loans can be defined as loans given to businesses and corporations against any kind of collateral. It is one of the most convenient financial products for businesses to manage the emergency conditions of the business.

• Assessing the requirements of the client

We at Terkar Capital will first understand the requirements of the client. We will also talk to the client about the future of their business, their plans to expand, restructure so on, and so forth. After assessing the requirements of the client, we will make an application for the business loan.

• Application and Documentation

Many business people have experienced the tedious nature of the documentation that needs to be done for the bank loan process. We at Terkar Capital take care of the documentation. We understand what stakeholders require to disburse the loan to our clients.

Once we receive the required documents we analyze the financials of the company and choose the financial institutions that best suit the client's requirements. This helps to avoid unnecessary inquiries to cibil and mess up while raising the finance.

 

Get your loan

After your proposal and documentation have been reviewed by the financial institution, your loan will be sanctioned. During the process, whenever the financial institution is in need of any clarification or any documentation we arrange for them. Our association with the client doesn't stop with the disbursement of the amount, rather it starts. We make sure the client should not have any problems while dealing with the respective financial institutions during the loan tenure.

 
What are the Documents Required for Business Loans?

Business loans are one of the most convenient types of loans for growing businesses. The documents required for Business Loans differ from one financial institution to another and as per the constitutions of the business. Reach out to us for documents usually required for a Business Loan.

Frequently Asked Questions on MSME Loans

FAQs on MSME

The micro, small and medium enterprises (MSME) sector is one of the largest providers of employment and industrial output in the country. As much as 45% of industrial production and 40% of India’s exports come from the MSME sector. Hence, the need for business finance is also higher in this sector.

What is MSME?

The Government of India understands the value of the contribution of the MSME sector. There is a dedicated ministry working on this segment. As per the Ministry of MSME – Micro Enterprises are the ones where the investment in plant and machinery is not more than Rs. 25 lacs. Small Enterprises are the ones where the investment in plant and machinery is more than Rs. 25 lacs and less than Rs. 5 crores. Medium enterprises are the ones where the investment in plant and machinery is more than Rs. 5 crores but exceeds Rs. 10 crores.

Who is eligible for MSME Loan?

There is a standard definition given by the government of India.

1. A stabilized business that has been in operations for more than 6 months.

2. A minimum turnover of ₹ 90,000 or more in the 3 months heralding your loan application.

3. The business should not fall under the blacklisted/ejected list for SBA finance.

4. The physical location of your business should not be on the negative location list.

5. Trusts, NGOs, and charitable organizations are not acceptable for small business loans.

If you are not aware that your business falls under a restricted category or location, you can contact us to confirm your eligibility.

How can I get a loan for MSME? OR How to apply for an MSME loan?

If you are looking ahead to avail and make the most out of this ambitious initiative by the management, you must consider Terkar Capital for availing the MSME Loan Scheme, it is a trustworthy lending institution, and even if you are uncertain about the scheme; the executives in Terkar Capital will explain you the complete procedure, client privacy and requirements are prioritized here and it has been helping such small and micro enterprises to flourish over the years.

What are the products under MSME Loan?

Identifying that business loans can be used for setting up a new enterprise or climbing up (expansion, diversification, modernization, technology up-gradation). These can be for the following:

• Acquisition of Plant and Machinery including lab equipment, testing equipment, furniture, electric fittings, etc

• Meeting working capital requirements would be as raw materials, stock-in-progress, finished goods, etc

• Trade Finance (Bill discounting) — for paying the creditors while anticipating payment from debtors

• Launch of new product variety, expansion of business, warehousing need, credit for marketing and advertising purpose

• Additional monetary compensation for any eligible purpose.

What is the interest rate for MSME?

The rate of interest for MSME is always cheaper compared to the loans. However, still, the rate of interest varies and depends upon the end use of the funds and the life of the business.

How Terkar Capital Helps in getting MSME Loan Funding?

Terkar Capital is one of the well-established MSME loan providers in Pune. and working across India. With a highly skilled and dedicated team at Terkar Capital, we ensure that we fulfill our client’s needs and requirements. We provide multiple solutions to our clients with the best interest rate options. However, the relationship doesn’t end with the sanctioning of the loan. We maintain a lifetime relationship with the customer to be of help whenever required.