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Project Finance

Project finance is the financing of long-term infrastructure, industrial projects 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. Project financing is a loan structure that relies primarily on the project's cash flow for repayment, with the project's assets, rights and interests held as secondary security or collateral. Project finance is especially attractive to the private sector because companies can fund major projects off balance sheet.

Projects loans are generally mid or long term period loans but lending institutions may consider the short term loan applications depending upon the feasibility of the project. The short term Project Loan can be availed for one year whereas the mid and long term project loans can be obtained for up to 5 to 10 years.

Project Loan is given by the lending institution or banks to the borrower for the purpose of business expansion, reconstruction etc. Project loan is also available to acquire the fixed assets like land & building, plant & machinery etc. Project Loans are available to the existing business or industrial houses for growth purpose and equally available to the new business entrants in form of seed or startup capital.

The rate of interest is quite competitive as the loan term is longer and may be affected by the periodic changes made by the lending institutes. Construction & Infrastructure, Engineering, Automobile, Power, Gas & Petrochemical industries are some of the business domains generally leverage on the Project Loans.

Basic Documents

  • 2 Photo of all directors
  • CLEAR All Director's PAN Card
  • Residence Address Proof of Directors
  • Office Address Proof
  • Shareholding on letter head
  • Registration certification if any
  • Shop Act License
  • MOA/AOA/Certificate of incorporation
  • Pan card of company

Financial Documents

  • All Directors' Latest 3 Yrs ITR with Computation of Income, Balance Sheet and Profit & Loss Statement
  • Company's Latest 3 Yrs ITR with Computation of Income, Balance Sheet and Profit & Loss Statement, if available
  • Provisional Financials as on date
  • Tax Audit Report with Annexure, Form 3CB & Form 3CD for last 3 years if available
  • Last 1 Year Bank Statements of ALL CURRENT , C.C. and Savings Accounts (if any)
  • Project report
What are the basic requirements for project finance?

Basic requirements to qualify for our project finance lending program:

  • Loans must be for at least 3 years and typically not more than 20 years (can finance up to the length of a power purchase/offtake agreement, for example).
  • No early payment penalty. Longer loans ease cash flow; shorter loans provide better interest rates.
  • Startups, expansions, renovations, refurbishments, energy efficiency retrofits,all are welcome.

What types of capital (asset classes) can be arranged?

Our specialization is the debt component of project finance, but we recognize that some companies have ambitious business plans that call for more debt than they can reasonably obtain. For others, they would rather not rely on loans when equity investors might be willing to provide "patient capital" for the potential upsides from their future exit. Accordingly, we can arrange debt, equity and various other forms of non-bank finance such as quasi-equity (has some elements of equity, such as more flexible payment schedules, plus some of debt), convertible debt, mezzanine debt, revenue contracts, M&A/buyouts, and more. We are also capable of securing early or seed-stage financing to conduct feasibility studies either through angel investors, impact investors or development finance institutions offering zero- or low-interest (concessionary) loans, forgivable loans or grants. Check our "industry sweet spot" then talk with us about your requirements.

How long does it take? How soon will I know if my loan application is approved?

Depends on which program you use. Initial approval-validation that the project is well qualified for reasonably attractive debt finance-usually takes a few weeks. How long to get a check written? Longer. Depends on the desired source of capital as well as the amount. If from investors at Dream Home Reality can be as fast as 90 days to closing. If from a developmental finance institution, loans can take 4-6 months, some even more, to secure the loan funds. DHR has a proven track record of reducing the time it takes by roughly one third -often the difference of many months-than if you attempt to "go it alone." Fast-track programs are available in most regions. Still count on at least a quarter or so, depending on your state of readiness. Loans get bogged down in legal challenges, due diligence issues, or other factors that we can safely help you avoid.

We offer an assessment tool that takes out most of the risks-a free service that helps you determine then summarize the project's strengths, improvement opportunities and keys to success. This thoughtful and clear approach asks you to score then summarize your project-or we'll help you create an effective summary-and put the main elements on the table for open and honest feedback from one or more selected investors. This collaborative approach is thanks to a strategic alliance with development bank representatives and open channels of communication with private sources. DHR can get you answers right away, once you're prepared.

Some of the best and lowest-cost sources of capital (such as government-sponsored international development loans), offering the lowest interest rates and most reasonable terms, are also quite interested in the details. Development banks are about the same-just as detail-oriented and thorough-with slightly higher interest rates.

Private investors, debt or equity, vary greatly in their due diligence and contracting. "Angels with a check-book" can make a decision within a month or so, but that's generally the exception. Most institutional investors take 6 months, more or less, with significant amounts of time (after the first 2-4 months of assessment and Q&A) taken up by handling policy clearances, the details of legal matters (such as perfecting liens against assets, asking for bank verifications, or obtaining audited financial statements) and other documentation. Sometimes a short-term bridge loan can be used to unlock funding in advance of the disbursement once the investment commitment letter has been obtained.

What does DHR charge?

Let's discuss what work is needed, and who will do what, before attempting to pinpoint appropriate fees-for-service. We rarely let money stand in the way of supporting a project with developmental impacts. That said, we typically charge industry-standard rates for fund raising, with our customer fees equal to roughly to half. formula used by our peers, plus a modest retainer.

Walk me through a cash flow statement.

Start with net income, go line by line through major adjustments (depreciation, changes in working capital and deferred taxes) to arrive at cash flows from operating activities.

  • Mention capital expenditures, asset sales, purchase of intangible assets, and purchase/sale of investment securities to arrive at cash flow from investing activities.
  • Mention repurchase/issuance of debt and equity and paying out dividends to arrive at cash flow from financing activities.
  • Adding cash flows from operations, cash flows from investments, and cash flows from financing gets you to total change of cash.
  • Beginning-of-period cash balance plus change in cash allows you to arrive at end-of-period cash balance.

What is working capital?

Working capital is defined as current assets minus current liabilities; it tells the financial statement user how much cash is tied up in the business through items such as receivables and inventories and also how much cash is going to be needed to pay off short term obligations in the next 12 months.

Is it possible for a company to show positive cash flows but be in grave trouble?

Absolutely. Two examples involve unsustainable improvements in working capital (a company is selling off inventory and delaying payables), and another example involves lack of revenues going forward.in the pipeline

How is it possible for a company to show positive net income but go bankrupt?

Two examples include deterioration of working capital (i.e. increasing accounts receivable, lowering accounts payable), and financial shenanigans.

I buy a piece of equipment, walk me through the impact on the 3 financial statements.

Initially, there is no impact (income statement); cash goes down, while PP&E goes up (balance sheet), and the purchase of PP&E is a cash outflow (cash flow statement)

Over the life of the asset: depreciation reduces net income (income statement); PP&E goes down by depreciation, while retained earnings go down (balance sheet); and depreciation is added back (because it is a non-cash expense that reduced net income) in the cash from operations section (cash flow statement).

Why are increases in accounts receivable a cash reduction on the cash flow statement?

Since our cash flow statement starts with net income, an increase in accounts receivable is an adjustment to net income to reflect the fact that the company never actually received those funds.

How is the income statement linked to the balance sheet?

Net income flows into retained earnings.

What is goodwill?

Goodwill is an asset that captures excess of the purchase price over fair market value of an acquired business.

Dream Home Reality

Ajay Co.op Hsg Society, Bldg. No.1, Office No.8, Senapati Bapat Road, Next To Dominoz Pizza, Pune-411016.

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