When starting a new project or introducing a new aspect to the business, functioning doesn’t meet the planned finance schedule all the time. Some kind of financial leverage needed to make the project come to reality. Thus, project funding in India addresses exactly the monetary requirements of the exclusive project. It means a loan obtained for fulfilling the finances which a new project brings along with it. Here the collateral security is the project itself. So, it means the loan can be repaid after the project completes or begins generating revenue.
Thus, it is the funding of infrastructural or industrial projects on a long-term basis. The project commences the cash flow once it has been completed. It is a common type of financing. So, used widely in the Indian market industry. Lending institutions, banks, NBFCs provide this type of loan.
Project funding is of two types in terms of the collateral required. Primary and secondary. The primary form of collateral is the project itself. And the secondary collateral is the value of the loan and this collateral is apart from the project. The reason for this basically, is the profile of the company. How old is it? whether it is a newly established firm? or a firm that has been in business for long years? The risk factor involves the perspective of banks and lending institutions.
In the project funding, the capital can raise for any type of project. So, this is just one of the vital features of project funding. It involves investor’s funds. Also the financed loans that to be repaid once the cash flow marks its way.
In project financing, the borrower is not liable to obligations in the cases of default. It is a type of mortgage that banks take while financing the project. So, when discrepancies like the borrower being unable to make the partial or complete repayment of the loan; Banks, financial institutions, and lending firms use that mortgage to recover the loan amount. Their recovery will be identical to the mortgage value, and cannot exceed it.
As this loan is taken for long-term, big scaled projects, thus there is a participation of multiple entities which ensures the process is collectively smooth, and fast.
The SPV (Special Purpose Vehicle) keeps an eye on the proceedings of the project. It also maintains a line of sight at the assets. So, after the completion of the project, asset allocation is processed with regards to the Special Purpose Vehicle which monitors all of that.
Therefore the cash flow which the project generates after completion is used for the repayment of the loan. A credit rating of the sponsor has minimal impact on project funding.
There are many benefits of project funding due to its specificality. So, here are some of the major benefits of project financing:
There is an opportunity for risk-sharing in project financing. It is due to the presence of multiple entities such as lenders or investors. The scope of risk-sharing in project funding is a collective one, this also minimizes the risk at the same time.
The debt would not fall on one lending institution or investment firm. Thus the capacity of containing debt also enhance due to the presence of multiple entities.
Project funding interest rate depends upon the profile and overall feasibility of the project. The investors and lending institutions decide on an interest rate. So, however, in some cases the project funding interest rate factor is absent. It is all dependent upon the cash flow generated after the completion of the project.
Understand Project Funding from FAQs.
Below are the steps to availing of project funding in India:
For borrowers who are looking for project financing to finance their project must first identify how the project will turn out? And, How will it be explained to the investors and lenders? So that the picture is clear on all sides so that the procedure can start.
All the costs, market taxes, and the overall identification of which industry would be applicable determine the feasibility of the project. So, this is extremely crucial.
This step is vital. Because the study of how much human resources or sources of technology will require would enable the sponsor to commence the procedure. Thus, it increases the overall sustainability of the project.
Finding out the right sources of investment in the projects is another important aspect. The lending parties must be completely aware of the proceedings of the project.
Identifying potential risks is the ultimate step of project financing. There are variously internal and external risks that surround a project irrespective of the industry. Managing such risks after identifying them makes sure the project proceeds seamlessly.
Learn in details about How to Get Project Funding in India?
Builders majorly avail project finance. There are lending institutions that specifically provide project finance for builders. Also project finance for real estate development. Any company which wants to introduce, complete and monetize the project is eligible or applicable for project funding loan.
Do you have a project to complete? or it needs to complete? Then you must consider Terkar Capital as your primary lending institution. It is one of the project funding agencies in India. We provide highly specialized assistance throughout the procedure. Over the years Terkar Capital has been participating in project financing. We have trained executives to guide the clients to the complete extent. Thus, Looking for project funding in India? Reach out to us today.
If you have any questions, please do not hesitate to ask us. Please also call us or email us before visiting to make sure that you will be served with our best services.
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