Project finance refers to monetary solutions that institutional lenders offer companies to fund their infrastructural projects. The financiers agree to provide the necessary resources after scrutinizing the projects’ feasibility and income-generating potential. They are generally willing to accept the projects’ future cashflow estimates as suitable repayments. Moreover, these lenders insist companies set aside their projects’ present assets, title, and rights as collaterals. They also ask for personal guarantees from the board of directors and shareholders of the companies. If the corporate enterprises default on their repayments, the financiers can seize the assets of the project.
Sertant Capital – What are the distinct stages of project financing?
Sertant Capital LLC is one of America’s most popular equipment leasing companies since its establishment in 1905. This corporate enterprise invests its resources in lucrative third-party leases within the country and abroad. It carries all its commercial activities from its headquarters in Irvine, California. Moreover, the company also finances many commercial equipment projects with their credit profiles. The company even provides exclusive services to its clients. These include managing their private funds and handling relationships in the capital market. The company has over 100 years of valuable experience in the equipment financing sector and is a trusted name in the USA.
The financial experts of Sertant Capital say project financing schemes are complex. The lenders providing the necessary funds are only willing to assist the companies after assessing their risks. The financiers need to be absolutely certain of the borrowers’ creditworthiness in repaying their debts. They generally break down project financing schemes into three distinct phases which are as follows:
- Pre-financing stage
In this phrase, the financiers identify and assess the companies’ strategic plan for their project. Only then do they determine whether or not the project is financially feasible. They need to be certain that the project plan aligns with the goals of the companies and financiers. The lenders even look into possible future risks and ways to mitigate them.
- Financing stage
This is the most critical stage where the companies and financiers agree on how to fund the project. They need to determine whether they can issue equity shares in the market or take out long-term loans. In many cases, the parties may decide on a combination of both. They also need to mutually prepare and verify the necessary documents. Only then can they figure out the mode of payment.
- Post-financing stage
Once work on the project commences, the companies and financiers agree to appoint a manager. He is responsible for monitoring the different phases of work. He also needs to ensure there is no misuse of assets and other resources. On the project’s completion, all the parties have to carefully determine the revenue generation from its operations. This is because the companies need to use cash flows to repay their dues.
The specialists at Sertant Capital conclude by saying project financing schemes involve a lot of money. Both companies and financiers must have a thorough understanding of the various stages of these schemes. In the pre-finance phrase, the financiers need to assess feasibility and risk potentials of the project they invest in. They have to determine how to fund the project in the finance phrase. Only then can they expect adequate cash flow generation for the repayment of their dues over time.
