Term Loans / Project Finance

Business lending will be either Term Loan or Working Capital Finance, or a combination of both.

(A) Term Loan/Project Finance is normally granted for part funding capital assets/purchase of fixed assets either for setting up of industrial units/Commercial ventures, or infrastructure/real estate projects. Term Loans shall also be granted on stand alone basis or for expansion of existing units/commercial ventures & also for its diversification.

(B) Basic purpose of Term Loan/Project Finance is funding the Capital cost/fixed assets/project assets.

(C) A detailed Information Memorandum (IM) prepared by the Project Appraising authorities covering various aspects of the project viz., profile of the promoters, management profile, type of product manufacturing (in case of manufacturing activity), locational advantages, permissions from various statutory authorities, hard cost, soft cost, project out lay, debt component, promoters contribution, project time lines, Date of Commencement of Commercial Operations, technical and financial viability etc shall form the basis for assessment.

(D) Relative project assets created/purchased from out of term loan and the promoters’ share of investment, shall be the primary security and the promoter’s contribution towards project funding shall be the margin.

(E) Term Lending will be generally in the form of consortium/syndication for amounts above $250,000.

Refinancing Basics

Refinancing is a common practice adopted mostly for home loan facilities. Refinancing is nothing but to pay off the old debt and taking a new one. The major reason for refinancing is to reduce interest rate. Reduced interest rate is nothing but less to pay every month and thus increase in the monthly income at hand. Refinancing happens all over, the only point to be taken into consideration is the right time to take refinancing options.

There are many reasons for refinance, the major ones according to Fanniemae being a. To reduce the interest rate. b. To build equity faster c. Change the loan type to one that is more feasible and more attractive. e. Improved credit rating. F. To draw equity on home that is already built. The major reasons are only two and that is to reduce interest and to increase the equity.

The interest rate again depends on the discount point, which you can produce at the time of refinancing. For example if the interest rate is 7% then with a discount point the interest rate reduced to 6.75%. . With the array of different types of lenders and brokers, the borrower is at an advantage to choose his lender according to the interest and various schemed offered to him. Continue reading