Corporate finance · 7 min read
Most guides stop at the day the loan is released. The longer story begins when the plant is commissioned and the lender starts watching how the project actually performs.
Once a project is commissioned, the loan moves from a construction-stage arrangement to a repayment-stage relationship. The moratorium ends, instalments begin, the lender asks for regular performance reports, and the promoter has to show that the plant earns what the project report promised. Knowing this sequence ahead of time helps you plan cash, keep records and avoid unpleasant surprises.
During construction, a lender mainly watches costs, progress and the promoter's contribution. After commissioning, the focus shifts to a different question: is the business producing enough cash to pay interest, repay principal and keep running?
The transition usually involves a formal step. The lender may ask for a certificate or confirmation that the project has been completed and that commercial operations have started, and the date is recorded because many later terms are linked to it. Repayment schedules, review points and some conditions in the sanction letter refer back to that date, so make sure it is documented properly and agreed with the lender in writing.
A moratorium is a period in which no principal is repaid, often because the plant is being built and ramped up. It does not mean the loan is free of cost, since interest during this period is either paid or built into the project cost, depending on how the loan was structured.
When the moratorium ends, principal instalments start. This is the point where many promoters feel the first real pressure, especially if the plant is still ramping up. Revisit your cash forecast several months before the first instalment, and compare it with actual production, sales and collections rather than with the original plan.
Rehearse the first instalment
A few months before the moratorium ends, run a simple month-by-month cash view with the instalment included. If the cushion looks thin, talk to your lender early rather than waiting for a missed date.
Project reports usually assume production builds up gradually. Reality is often slower or lumpier, with commissioning snags, trial runs, workforce training and customer approvals all taking time. Lenders know this, but they expect to hear about it.
Keep a short log of what is happening: capacity actually achieved, orders in hand, customers added, and problems being fixed. If actual performance is behind the report, a clear explanation with a recovery plan is far better received than silence.
Expect to share information regularly. The common items are:
The exact list and timing sit in your sanction letter, so read it again after commissioning and set reminders against each date.
Covenants are conditions the borrower agrees to meet. Some are financial, such as keeping debt service coverage and debt to equity within agreed bounds. Others are behavioural, such as not taking new borrowing, not paying large dividends, or not changing the business without consent.
Because covenants are tested during operations, a plant that performs below plan can trip them even when every instalment is paid on time. Ask your lender how and when each one is tested, and track your own numbers against them every quarter.
Lenders normally review the account at regular intervals. The review typically covers repayment record, financial performance, covenant compliance, asset condition and insurance, and sometimes a visit to the site. You may be asked to explain differences from the projections.
| Stage | What the lender watches |
|---|---|
| Commissioning | Completion confirmation and start date of operations |
| Ramp-up | Capacity achieved, sales build-up, trial problems |
| Repayment | Instalments on time, cash cushion, covenant tests |
| Steady operations | Annual results, asset upkeep, insurance, conduct |
| Review or renewal | Overall performance against the original plan |
Even well-run projects can fall short because of delayed orders, input price swings or a customer concentration problem. Early signs include a thin cash cushion, rising dependence on short-term borrowing and strained supplier payments.
Lenders generally respond better to a promoter who raises the issue before an instalment is missed. Options may include a revised schedule, a temporary change in terms, or a structured restructuring discussion, but all depend on the lender's policy and the facts of your case, and none can be assumed. Delays in payment can also move an account through early-warning categories such as SMA-0, SMA-1 and SMA-2, which is why acting before due dates matters.
Do not wait for the due date
Missed instalments are recorded and can affect your credit standing with every lender you deal with. Speak to the lender before a payment is at risk, and bring figures that support what you are asking.
Disputes and delays often come from missing paperwork rather than weak performance. Keep a single folder for the sanction letter, security documents, insurance policies, asset registers, bills for machinery and the completion confirmation. When the lender asks for a document, being able to produce it the same day builds confidence that the project is well managed.
It also helps to keep the original project report beside actual results. Seeing planned and actual figures side by side makes review meetings shorter and lets you explain variances before the lender raises them.
If the business does well, you may want to repay early or move the loan to another lender. Check the prepayment terms in your sanction letter, because some loans carry charges or conditions. Taking on additional borrowing may need the existing lender's consent under the covenants, so raise it early.
A simple routine keeps you ahead of most issues:
If you want help reading your sanction conditions or preparing for the first repayment phase, Lalsar Infra can review your project finance structure with you. Always confirm the exact terms and conditions with your lender.
Questions
They typically start when the moratorium ends, which is usually linked to commissioning or a fixed period set in the sanction letter. The exact start depends on your agreement, so check the repayment schedule and confirm the date with your lender in writing.
No. Interest usually continues to accrue during the moratorium. Depending on the structure, it may be paid periodically or capitalised into the project cost. Check how your sanction treats it, because it affects both your cash needs and the total amount owed.
Tell the lender early, with figures and a recovery plan. Lenders often accept a slower ramp-up when it is explained, but surprises are treated harder. Depending on policy, they may consider a revised schedule, though nothing can be promised in advance.
Often only with the lender's consent, because covenants commonly restrict additional debt. Ask before you commit to anything. A clear case for how the new funds will be repaid makes consent more likely.
Reviews usually happen at regular intervals, often yearly, with ongoing reporting in between. Your sanction letter sets the pattern, so check it and prepare updated financials and an explanation of results ahead of each review.
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