Project Finance · Question

What conditions must I meet before the first drawdown of a project loan?

Short answer

A sanction letter is not money in hand. Before the first release, lenders usually require you to accept the sanction terms, sign the loan and security documents, create the agreed charges, bring in your own contribution, obtain key approvals and insurance, and pay fees. These are called conditions precedent. Your sanction letter lists the exact ones, so work through it line by line.

In more detail

After sanction, the lender's legal and credit teams convert the approved terms into binding documents, and the first drawdown waits until each condition is met. Starting early on the slow items avoids weeks of idle waiting.

The groups of conditions that commonly appear:

Acceptance: you formally accept the sanction terms, sometimes within a stated time.
Documentation: loan agreement, security documents, board resolutions and any guarantees are signed and, where required, registered.
Security: mortgage of land and buildings, charge on machinery and, where applicable, collateral and guarantees are created, with title checked by the lender's counsel.
Promoter contribution: your agreed share is brought in and evidenced.
Approvals: statutory permissions, land-use and environmental clearances and other licences that the project needs.
Insurance: cover on assets, with the lender noted as an interested party.
Fees and expenses: processing and legal charges, as per the sanction.
Project account: a designated account is opened for receipts and payments of the project.

Run documents and approvals in parallel

Title verification, valuation and approvals are slow because outside parties are involved. Ask the lender for the full list of conditions on day one and assign an owner to each, so none becomes the last hurdle.

Where a condition cannot be met in time, ask the lender in writing whether it can be shifted to a later stage, known as a condition subsequent. Some can be, others cannot. Do not begin large spending against the loan, such as ordering major equipment, before you are sure the first release will actually arrive.

Key points

Sanction is only approval; release waits on conditions precedent.
Expect documents, security creation, promoter money, approvals, insurance and fees.
The sanction letter is the authoritative list for your loan.
Start slow items such as title checks and approvals as soon as sanction arrives.
Ask in writing if any condition can be deferred, and do not assume it will be.

Who this applies to

Promoters who have just received a sanction letter.
Companies arranging board resolutions and security documents.
Owners planning the date of first major payment to vendors.

Last reviewed 3 October 2026

This answer is general information, not advice on your particular case. Terms, eligibility, and requirements change, so check the current position with the relevant institution or authority.