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Questions
Questions about Project Finance
Plain answers to common questions on this service, grouped by what you are trying to find out. Each answer starts with the direct reply.
Basics
- What is a debt service coverage ratio and why does it matter for my project?Learn what repayment cover means for a new project, why lenders look at it closely, and how to judge whether your plan leaves enough room each year.
- What is a techno-economic viability study and when does a lender ask for one?What an independent technology and market review covers, why lenders commission one for larger or unfamiliar projects, and how to prepare for it.
- What is a project break-even point and how will a lender read it?What break-even means for a new project, why lenders treat it as a comfort measure, and how to present it so the margin of safety is clear.
Eligibility & documents
- Can I count land I already own as part of my promoter contribution?When existing land can count towards your own share of project cost, how lenders value it, and the documents and conditions that usually apply.
- Can supplier credit on machinery form part of my means of finance?When deferred payment from a machinery supplier can count as a funding source in your project plan, and how lenders treat it alongside loans and promoter money.
Process
- How are project loan instalments released against construction progress?See how lenders tie each release of a project loan to verified work on site, and which evidence usually supports the request for the next amount.
- Does my own money go in before the lender releases project loan tranches?Learn whether promoter money usually goes in before each project loan tranche, how a pro-rata mix works, and what to settle at sanction.
- How do I decide how long a repayment period my project can support?A practical way to match loan tenure to when your project actually earns cash, so instalments stay affordable through the slow early years.
- What conditions must I meet before the first drawdown of a project loan?A general checklist of the conditions precedent that follow a sanction, from security documents to promoter money, before a lender releases the first amount.
Choosing & comparing
- What is the difference between primary and collateral security in a project loan?Know which assets the lender takes as the first claim in a project loan, which extra assets may be added, and how each affects your risk as a promoter.
- Should I use internal accruals before approaching a lender for my expansion?Weigh using your own retained surplus against borrowing for expansion, with the liquidity buffer, lender expectations and growth timing that decide the balance.
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