EPC & Infrastructure Contractors

Non-fund limits are the backbone, not an afterthought

An EPC or infrastructure contractor typically needs bank guarantees at nearly every stage of a project — a bid bond to participate in a tender, a performance guarantee once the contract is awarded, and often an advance-payment guarantee to draw mobilisation funds from the client. These are non-fund based facilities: they do not draw cash directly, but they consume the contractor's overall limit with the bank and carry their own margin and collateral requirements. A contractor that focuses only on cash credit and term loans, without planning bank guarantee capacity alongside project pipeline, will frequently find itself unable to bid for new work even while its cash flow looks healthy.

Retention money and the government payment cycle

Government and large corporate clients commonly retain a portion of each certified bill — often five to ten per cent, though the exact figure varies by contract — releasing it only after defect liability periods lapse or final project completion is certified. Combined with certification and billing cycles that can themselves run to several months, this means a meaningful share of a contractor's earned revenue sits uncollected for a long period, sometimes over the life of the entire project. Contractors need working-capital limits sized to carry this retention gap, not just the immediate execution costs of ongoing work.

What lenders look at

Appraisers look at the contractor's track record of project completion within budget and timeline, the diversity of the current order book by client and geography, the ageing of certified but uncollected bills and retention money, exposure to any ongoing disputes or arbitration, and — critically for EPC — whether margins on fixed-price contracts have been eroded by input-cost inflation during execution. A contractor whose order book is concentrated in a small number of large government projects carries different risk from one with a diversified mix of public and private clients, and lenders structure limits accordingly.

Claims, arbitration and contract disputes

Disputes over certified quantities, price escalation, extension of time, or scope changes are a routine feature of large infrastructure contracts, and many contractors carry a portfolio of claims against clients at various stages of negotiation or arbitration at any given time. From a financing perspective, the key distinction is between claims recognised as probable and reasonably estimable, which can sometimes be considered as part of the business's asset position with appropriate caution, and claims that are speculative or heavily contested, which a prudent lender will discount entirely regardless of the amount claimed. Contractors who present their claims position transparently, with a realistic view of collection likelihood and timeline rather than treating every claim as if it were as good as collected, generally build more durable lender trust over multiple financing cycles than those who lean on optimistic claim valuations to support a weaker underlying cash position.

Building a proposal that holds up

• Present current bank guarantee utilisation and headroom alongside your working-capital request.
• Show ageing of certified bills and retention money by project and client.
• Disclose any ongoing disputes, arbitration, or certification delays honestly and early.
• Demonstrate order-book diversity across clients and geographies where it exists.
• For fixed-price contracts, show how input-cost inflation risk is managed or hedged where possible.
• Keep a project-wise track record of completion timelines and cost performance ready to support the current ask.