New Project Finance Loan
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Loan Experts is committed to provide the world class financial services among itscustomers. We are serving our renowned associate Bankers and valuable customers forlast 15 years.
Sachin Vashishth
(Managing Director)
Contact Info
- +91-9810454531
- Projectfinancer@yahoo.co.in
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A New Project Finance Loan from government banks in India is a specialized type of loan provided to finance large-scale projects, particularly in sectors like infrastructure, manufacturing, energy, and other capital-intensive industries. These loans are structured to support the development and execution of new projects, covering costs from project initiation to completion.
Key Features of Project Finance Loans
Purpose:
- 1. To fund new projects, including infrastructure development (roads, bridges, airports), manufacturing plants, power generation units, and other large-scale projects.
- 2. Can be used for setting up new industrial units, expansion of existing units, or large-scale construction projects.
- 1. Term Loans: Typically provided for a longer duration, aligned with the project’s cash flow and completion timeline.
- 2. Working Capital Loans: Provided to cover the operational expenses during the project execution phase.
- 1. The loan amount depends on the project’s total cost, typically covering 60-70% of the project cost.
- 2. The remaining portion of the project cost is expected to be funded by equity contributions from the project sponsors or promoters.
- 1. Interest rates are usually linked to the bank’s base rate or the Marginal Cost of Funds based Lending Rate (MCLR), with a spread added based on the project’s risk profile.
- 2. Rates may vary depending on the project’s nature, risk, and the borrower’s creditworthiness, typically ranging from 8% to 12% per annum.
- 1. The repayment tenure is typically long-term, ranging from 5 to 20 years, with the possibility of a moratorium period during the project construction phase.
- 2. Repayment schedules are usually structured to match the project’s revenue generation, often including balloon payments or bullet repayments.
- 1. The primary collateral is often the project assets themselves, including land, buildings, machinery, and other tangible assets.
- 2. Additional security may include personal or corporate guarantees, pledges of shares, and assignment of project cash flows.
- 3. In some cases, banks may require a Debt Service Reserve Account (DSRA) to cover debt obligations for a certain period.
- 1. Disbursement of funds is typically done in phases, linked to the project’s progress milestones.
- 2. Banks may conduct regular project monitoring and audits before releasing further tranches of the loan.
Eligibility Criteria for Project Finance Loans
Promoter’s Background:
- 1. The experience and financial strength of the project promoters or sponsors are critical factors.
- 2. Banks prefer promoters with a proven track record in executing similar projects.
- 1. A detailed project report (DPR) including technical feasibility, market analysis, financial projections, and risk assessment is mandatory.
- 2. The project should demonstrate strong revenue potential and the ability to generate sufficient cash flows to service the debt.
- 1. Promoters are generally required to contribute a significant portion of the project cost as equity.
- The equity-debt ratio is a crucial factor, typically maintained at 1:2 or 1:3.
- 1. The credit history of the promoters and the borrowing entity plays a vital role in determining loan eligibility.
- 2. A good credit score (700 and above) is preferred.
- 1. All necessary regulatory approvals, environmental clearances, and permits must be obtained before loan sanctioning.
Documentation Requirements
Promoter’s Documentation:
- 1. KYC documents of promoters.
- 2. Financial statements of promoters and their business entities.
- 3. Background and experience details.
- 1. Detailed Project Report (DPR) covering technical, financial, and market feasibility.
- 2. Project implementation schedule and cost estimates.
- 3. Revenue projections and cash flow statements.
- 1. Audited financial statements of the borrowing entity for the past 3-5 years.
- 2. Projected financial statements for the project duration.
- 4. Title deeds of the land and property where the project is to be executed.
- 5. Copies of all regulatory approvals, licenses, and permits.
- 1. Details of assets offered as collateral, including valuation reports.
- 2. Any additional security documents like guarantees, share pledges, etc.
Specific Government Schemes for Project Finance
Credit Guarantee Fund Scheme for MSMEs (CGTMSE):
- 1. Provides collateral-free loans to micro and small enterprises, including for project finance, with a guarantee cover of up to ₹2 crores.
- 1. Offers project finance loans to small enterprises, particularly in manufacturing and service sectors, under the Shishu, Kishor, and Tarun categories.
- 1. Provides loans for greenfield enterprises set up by SC/ST and women entrepreneurs, covering up to 75% of the project cost with a maximum limit of ₹1 crore.
- 1. The Small Industries Development Bank of India (SIDBI) offers various project finance schemes for MSMEs, with flexible repayment terms and lower interest rates.
- 1. Supports large-scale infrastructure projects with financial assistance from the government, aimed at upgrading industrial infrastructure.
Benefits of Project Finance Loans
Large Loan Amounts:
- 1. Provides access to substantial funding for large-scale projects, often in the range of hundreds of crores.
- 1. Extended repayment periods aligned with the project’s cash flow ensure that debt servicing does not strain the project’s finances.
- 1. Tailored repayment schedules and phased disbursements reduce the financial burden on the project during the construction phase.
- 1. Banks often take a participatory approach in project monitoring, sharing both the risks and rewards with the project promoters.
- 1. Government banks offer advisory services, helping promoters navigate regulatory challenges, optimize project execution, and manage risks
Application Process
Initial Consultation:
- 1. Promoters meet with bank officials to discuss the project’s scope, financing needs, and preliminary eligibility.
- 1. A comprehensive DPR, including all technical, financial, and market aspects, is submitted for bank review.
- 1. The bank conducts detailed due diligence, including financial analysis, legal scrutiny, and site inspections.
- 1. Upon approval, the bank sanctions the loan amount, specifying the disbursement schedule and repayment terms.
- 1. Funds are disbursed in phases, typically aligned with project milestones.
- 1. The bank continuously monitors project progress, ensuring timely completion and adherence to budget.
About Us
Loan Experts is committed to provide the world class financial services among itscustomers. We are serving our renowned associate Bankers and valuable customers forlast 15 years.
Sachin Vashishth
(Managing Director)
Contact Info
- +91-9810454531
- Projectfinancer@yahoo.co.in