Project financing is financing and repayment of long term infrastructure and industrial project loans based on the cash flows of the project, rather than the balance sheets of its sponsors or project owners. Project financing loans are usually non-recourse and are secured by the project assets and amortized from the project cash flows. Project lenders are given lien to the assets of the project being financed and assume control of the project if the project owner/company has difficulty in complying with the loan terms.
We understand that Risk identification and allocation is key to project financing and owing to a number of technical, environmental, political, economic risk inherent especially in developing countries and emerging markets and/or projects with high business leverage, funding sources, technology owners, equipment developers prefer to fund and/or build projects against bankable collateral and therefore may require limited recourse financing secured by the surety of the sponsors or the project owners. Through our Associates, we provide these financial collateral such as
- Letter of Credit (LC)
- Standby Letter of Credit (SBLC)
- Bank Guarantee
- Advance Payment Guarantee
- Escrow Payment Option
- Performance Guarantee Bond.
Our Bankable collateral service is not limited to Bank Guarantee, a Standby Letter of Credit or a Blocked Fund Confirmation. It also includes activation of dormant asset, and the structure of an unencumbered cash backed, new issue SBLC, or Bank Guarantee. With these instruments, a new door to avail funds for investment, project funding or business finance, is opened.
This bankable collateral can be structured based either, on your own cash, assets, and equity or on collateral lending (3rd Party Collateral). Contract terms could be 1 to 5 years or more. Transaction is usually transmitted via verbiage of the bank instrument in line with standard text formats, banking protocols and financial standards.
In structuring bankable collateral, you need to consider if you:
- Can back up the BG with your own cash?
- Can pay an eventual claim yourself?
- Can prove that you have the annual collateral lending and instrument fee and leasing fee, if the service is provided by a third party
- Have a funding bank ready to provide you with cash against a Bank Guarantee
- Need a Pre-Advice to trigger a firm commitment from your funding bank to fund against the instrument
- Have sufficient cash funds, to pay for the bank fees to perform these services.