Let's look at the main stages of project financing:
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 conduit cn phone data hat 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 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 realistic 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.