Project Loan is given by the lending institution or banks to the borrower for the purpose of business expansion.

  1. Project loan would mean any term loan which has been extended for the purpose of setting up of an economic venture of long term nature like infrastructure, industrial, residential and commercial housing, educational institutes and public services based upon a non recourse or limited recourse financial structure in which project debt and equity used to finance the project are paid back from the cash flow generated by the project.
  2. Project financing is a loan structure that relies primarily on the projects cash flow for repayment, with the projects assets held as primary security and rights and interest held as collateral security.
  3. The project finance also includes build operate and transfer project [bot]. Generally bot project are carry out by incorporating a special purpose vehicle [spv] company. In this model the project remains off balance sheet for the sponsoring companies which float the spv.
  4. Project loan is available for new project as well as for expansion of an existing project. The project loan generally have long gestation period and revenue starts after completion of project and commencement of commercial operation. Therefore project loan specifically have a commercial operation date. The tenure of loan is mid-term to long-term ranging 5years to 10years with moratorium period of 1year to 3years.
  5. Short term project loan is considered for the project having shorter gestation period and start generating sufficient revenue immediately after commercial operation date to meat repayment obligation. The tenure of such loan remains usually for less than 3years with moratorium of 1years to 2years. Project loan for short term is common in residential and commercial housing project including redevelopment housing projects.
  6. The promoters contribution in project loan ranges from 15% to 25% of cost of project that means 75% to 85% of cost of project is available as project loan.
  7. The interest on project loan ranges between 10.5% to 14.5% depending on quantum of loan, credit rating of the borrower, and loan tenure.
  8. Project loan is to be utilized to acquire all project related assets like land and building, plant and machinery, equipments, accessories and consumables etc.
  9. Generally project loan are high value loan and it is mostly required for capital intensive project like road and infrastructure sector, textile, cement, iron & steel, oil & gas as well large size residential and commercial complex.
  10. Therefore a detailed project report containing all aspect of project like technical and commercial viability, managerial competence, financial capabilities of the promoters, financial analysis including cash flow for the entire tenure of loan, credit rating, marketing strategies, is necessary to get the project loan sanctioned from the bank/fi. Bankers always prefer to finance the projects promoted by the entities having strong solvency ratio, acceptable debt coverage ratio of the project and capabilities and competence of the promoters to execute and complete the project within the time schedule.
  11. is most preferred centre for preparation of detailed project report containing all information of the project and ensuring sanction of project loan from the banks/fi within the shortest possible time and at most competitive rate of interest.
  12. also execute the sanction of high value project loan under consortium arrangements as well as under multiple banking arrangement.