PROJECT FINANCING PROCEDURE
Here is the procedure that needs to be followed by a client seeking to raise project finance before a Term Sheet(s) can be issued by our Lender(s)/Investor(s):
Once the client accepts our T&C, he signs and returns it to us. We then send the “CLIENT AGREEMENT” draft to be filled, signed, notarized and returned to us.
We send a copy of the executed copy of the CLIENT AGREEMENT duly countersigned by us.
The client then fills up the PROJECT FINANCE LOAN APPLICATION FORM online by paying our Engagement Fee of US$ 17,700.00 and submits this form with all necessary information and documentation required in the application form.
Once we receive the above, we send the client the First Evaluation Report of the project. Depending on the evaluation report, the client might be required to furnish additional information relating to his company and his project(s). If the Business Plan submitted by the client falls short of the industry standard, our team will assist the client by suggesting how to bring it to a standard widely accepted by project lenders/ investors. This assistance, however, is provided at an extra cost to the client and such cost is specific to the project.
Next will be a round of video conferencing between the client and our expert project finance team to finalize the submissions to actual project lenders/investors.
Once project lenders / investors firm up, a Term Sheet will be released based on the submission of the Business Plan. Term Sheets are project specific and hence there is no general format.
Upon acceptance of the Term Sheet by the client, a due diligence will be conducted by the project lenders/investors at their own costs (Please note, a big loan/investment size cannot be fulfilled by a single lending/ investment source alone. There will be multiple project lenders/ investors involved and we might undertake a Loan / Equity syndication process at an additional cost to the client)
Upon successful due diligence, the client will enter into the Joint Venture or Loan Agreement(s) with individual lender(s) / Investor(s).
Joint Venture Company formation or Loan disbursal will ensue as per the JV/ Loan Agreements signed between parties.
Important To Note:
We quickly respond to all inquiries.
We do not delegate executive time to an inquiry until your project, as expressed in your fully completed Project Finance Application form, has been thoroughly evaluated by our analysts.
To ensure our executives do not waste time on unrealistic inquiries we do not enter discussions in any form until we have a full understanding of your project's potential and risks. We therefore do not offer meetings, hold telephone discussions or return telephone calls until we have thoroughly evaluated your project.
Please do not send us additional communications during the application phase as it delays the application process.
We do not finance projects valued at less than $5,000,000.00 (United States Dollars five million), we do not finance acquisitions and we don't finance projects in countries mentioned in this Restricted Nations list
All our official communications are in English. We do not offer a translation service.
Under the funding procedure, the Applicant may be asked to submit the following (but not limited to) documents relating to the project that is seeking project finance:
Business Plan/ Pitch Deck
Project Financial Structure + Legal Structure + Management Structure
Cash Flow Projections for the next five to ten years
SWOT Analysis of the project
Risk Analysis & Mitigation details
SPV/SPC(Special Purpose Company/Vehicle) Registration documents
Federal and Local Government Departmental Clearances and Approval records
Market Research Report
Feasibility/ Techno-Economic Evaluation Report (DFS/FSR)
Detailed Project Report (DPR)
Off Taker Agreements/ Contracts /PPAs
Procurement Agreements / Contracts supported by Equipment specs and Proforma Invoices
EPC Agreements / Contracts (with companies that will construct the project infrastructure)
Operations & Maintenance (O&M) Agreements / Contracts
Debt Exposure Details
Patents or Copyright certificates (If any)
Project Land Status and records including ownership/lease records
Legal Report (Establishing non-criminality)
Upon receipt of all the documents and information submitted by the applicant, a Funder would evaluate the project in greater detail. Generally an Appraisal meeting is convened where all the decision makers at the Funding Company officially review the project as presented to determine if the project is within their scope of funding. Subsequent to this meeting, a due diligence of the project is generally undertaken by the Project Funder(s)/ Investor(s) and the the Project Sponsors/Applicant pay(s) for the expenses involved in carrying out the due diligence. Such expenses are project specific .
Financial Due Diligence
Financial due diligence requires that, during loan preparation and processing, sufficient analysis is undertaken to enable an informed assessment to be made with respect to project financial viability and long-term sustainability, and that the borrowers’ financial and project management systems are, or will be, sufficiently robust to ensure that funds are used for the purpose intended and that controls will be in place to support monitoring and supervision of the project.
There are Guidelines that provide the framework for financial due diligence, namely completion of a financial management assessment (FMA) of the executing agency (EA) and/or implementing agency (IA), financial evaluation of the project, and assessment of implementation arrangements (from a financial perspective, including disbursement and auditing arrangements).
The methodology note provides specific guidance in four primary aspects of financial due diligence:
financial management assessment,
project cost estimates and financing plan,
financial analysis, and
It also provides guidance on assessing disbursement auditing arrangements. This financial due diligence methodology note offers a suggested approach for operationalizing the standard project preparation and loan processing requirements of the Guidelines. the Guidelines, together with the methodology note, should be seen as a reference guide to assist staff in conducting an appropriate degree of financial due diligence during project preparation and processing, and should guide staff in determining the appropriate level of financial management safeguards required for a given project and/or EA and/or IA. The advice, directions, and recommendations provided should not be regarded as a substitute for the professional judgment of SUBCON staff.
Financial Management Assessment
Effective financial management within the EA and/or IA is a critical success factor for project sustainability, both in the effective use of funds and in the safeguard of assets once created. Irrespective of how well a particular project or program is designed and implemented, if the EA and/or IA does not have the capacity to effectively manage its financial resources, the benefits of the project are unlikely to be sustainable.
The objective of the financial management assessment (FMA) is to ensure that the EA and/or IA has, or will have, sufficiently strong and robust financial management systems and procedures in place to ensure sustainability of project investments and benefits over time.
The FMA is a review of the entity’s systems for financial and management accounting, reporting, auditing, and internal controls. It also involves an assessment of the entity’s disbursement and cash flow management arrangements, and governance and anticorruption measures. The FMA is not an audit; it is a review designed to determine whether or not the entity’s financial management arrangements are sufficient for the purposes of project implementation.
Approach and Methodology
The first step is to determine whether an FMA has recently been completed by any other credible financial institution (Bank, NBFC, VC or PE agencies) , the objective being to avoid duplicating diagnostic work that already exists. If an FMA exists, this should be reviewed and, in particular, any work done to overcome previously identified weaknesses should be checked. The original FMA can then be updated accordingly.
While planning to rely on the work of another lender , SUBCONTRACTS INDIA would thoroughly review the agency’s assessment report to determine whether or not the results of the FMA are reasonable and can be accepted by SUBCONTRACTS INDIA.
If an FMA has never been completed, or if there have been significant on-ground changes which render an existing FMA obsolete, then the following approach to the FMA is recommended:
Review the Economic Sector diagnostic studies specific to the country where the project is located, including the country financial accountability assessment, country procurement assessment report, country governance assessment, and diagnostic study on accounting and auditing.
Early in project preparation, have the borrower/project promoter complete a Financial Management Assessment Questionnaire (FMAQ).
Review responses to the FMAQ, determine what (if any) additional information is required in order to be able to conclude whether or not the financial management arrangements (a) are capable of recording all transactions and balances, (b) support the preparation of regular and reliable financial statements, (c) safeguard the entity’s assets, and (d) are subject to audit.
Review past audit reports and audit management letters to assess what concerns have previously been raised on systems and internal controls.
Form a conclusion with respect to whether or not the financial management arrangements and financial and project accounting systems can be relied upon for the purposes of the project.
If issues and/or weaknesses are identified, determine the most appropriate mitigation measures (e.g., restructuring finance sections, increasing finance staff, filling vacant posts, developing new systems, developing financial reporting, training, etc.).
Determine whether, given the findings, it is necessary to include a project component to strengthen financial management in the EA and/or IA and/or establish or strengthen a project implementation or project management office via either technical assistance or consultant support within the project.
Due Diligence service is rendered by an accredited Due Diligence service provider appointed by the Funding Partner Company. Due Diligence is by far the most important exercise in the funding consideration process.
The charges for the Due Diligence are to be borne by the applicant. These charges are specific for every case and the applicant is given prior notice of this.
It is extremely important that the applicant understands clearly the processes of Due Diligence is to secure a successful transaction and mutual business relationship between the applicant and the Funding Partner Company.
The Funding Partner Companies provide finance to viable projects on precise terms. There are no general terms. Everything is specific to the project under consideration.
Once the Due Diligence is successfully completed, a Funding Offer is officially made from Funding Partner Company to the applicant (Project Owner(s)/ Promoter(s)). The Project Owner(s)/Promoter(s) are issued an Invitation Letter for a table meeting in the Funding Partner Company’s office which can be in any country. Post a personal interview of the project owner(s)/promoter(s) ,the MOU/Loan Agreement is drafted and signed. Insurance requirements too would be discussed and finalized at this meeting.
Post successful completion of all of the above processes, funding disbursement would commence within the specified time frame .
Please note our project funding services DO NOT come free and we are rather choosy about who we serve. We encourage only serious clients who understand what it takes to arrange finances for businesses. Our seamless services start with our client sending us a formal Letter of Intent expressing his/her desire to hire our services and then following this up with entering into a formal service agreement with us and depositing the token Engagement Fee which is non refundable. That is not all. You would be further liable to pay a Success Fee (case specific) post successful closure of funding.