Investment lending is not identical to long-term, although it also involves a longer period of use of credit resources, in contrast to short-term loans to replenish working capital.
First of all, for investment lending the presence of a financed project, new or already existing, is characteristic, for the implementation or development of which the credit resources attracted by the borrowing enterprise are directed. At the same time, the investor bank actually assumes part of the risks associated with the implementation of the funded project. And the result of the decision made in favor of lending to the project, respectively, depends on the income planned from the implementation of the project. Thus, the current financial condition of the enterprise, the amount of profit, the dynamics of growth of indicators, stability, creditworthiness, solvency of the enterprise are certainly taken into account, but the investment project. When lending an investment project, special attention is paid to the predicted result, to the planned "output" from the implementation of the project "into life".
At the same time, which is especially important for borrowers, the attraction of long-term resources does not reduce the limit of lending amounts for replenishment of working capital, that is, the borrowing enterprise has the opportunity to separately finance investment and current purposes.
Investment lending traditionally divided into direct investment lending, project financing and financing of construction projects. Each direction deserves separate consideration.
Investment lending involves the injection of long-term (long-term) money into an enterprise, which is closest to the concept of long-term lending. This direction is less risky, since the actual performance of the enterprise for the analyzed period is taken into account, forecast indicators are built, including without taking into account the implementation of the project, since if the enterprise would continue to engage in current activities under the same circumstances and at the same time would pay the costs of investment loan. As a rule, re-equipment, renewal of fixed assets, acquisition of additional equipment, expansion of the vehicle fleet or fleet of vehicles, acquisition and launch of another similar line of equipment, purchase of another store, and similar expansion of current activities are suitable for this direction. That is, the enterprise continues to move in the usual direction, or, if it opens a new direction, then only if it is possible to cover all the risks with the profit received from current activities.
Project finance this is the area of lending where the financing of the project is partially taken over by the creditor bank, since it is supposed to finance a project that did not take place, and the calculation of the project's payback is based on the expected benefits from the project. Accordingly, the enterprise intends to settle with the creditor bank for the loan at the expense of the income received from the implementation of the project. Project financing includes new self-sustaining lines of business for an existing enterprise, or the creation of a new enterprise, a new production. The creditor bank can even become a direct investor of the enterprise, that is, invest directly in its authorized capital, if it expects to increase the company's cash flows in the future and, accordingly, receive a profit from its investments.
Financing construction projects represents the provision of loans for the construction of residential, commercial and industrial facilities. Typically, the bank finances construction project if there is a ready-made package of the necessary initial permits for construction and installation works, approved design and estimate documentation, registered land plot (the right of long-term lease or ownership). That is, bank financing is attracted at the investment stage of the project, when the preparatory stage of the project, design and other preparatory work, has already been carried out without the participation of the Bank. In this direction, the requirements for the share of investment by the borrowing enterprise in the implementation of the project of own funds are the highest. When considering a project, it is calculated economical effect on the intended use of the areas under construction, whether they will be leased or will be further implemented.
The main requirements for the bank to the borrower
Lending for investment projects requires a well-defined business plan, a feasibility study and, in fact, contracts (agreements, transactions) providing for the supply of purchased property, the implementation of the necessary work.
Certainly the borrower, either in individual cases the guarantor enterprise must have a stable financial position, be able to provide quality service and repay the loan in a timely manner.
The implementation, or rather the financing of the project, the bank does not undertake one hundred percent, it requires a mandatory share of the borrower's investment of his own funds, which ranges from twenty to fifty percent of total cost project. At the same time, it is possible to set off investments already made by the borrower at the project preparation stage, but the period for making such investments may be limited. For example, only funds spent by the enterprise on the implementation of the project no earlier than in the last six months will be accepted for accounting as own investments.
Investment lending as well as other types bank lending assumes the presence of collateral, that is, loans are provided against liquid collateral.
When considering a project, the experience of the project initiator in the implementation of similar projects is taken into account. This factor is not decisive, but increases the likelihood of a positive decision of the bank to grant a loan.
AT without fail enterprises affiliated (interrelated) with the borrower are analyzed.
Basic conditions for investment lending slightly different from short-term loans:
- willingness to invest own funds in the project or to document the investments made;
- monthly repayment percent (less often quarterly), but a slight delay in payments is also possible;
- loan term up to seven, in some cases up to ten years, especially if the borrower is implementing a project with state support. The payback period of investments should not exceed the loan period;
- the debt repayment schedule is agreed with the borrower and directly depends on the parameters of the financed project;
- collateral is required;
- credit is provided both in rubles and in foreign currency(if, for example, imported equipment is purchased abroad);
- different modes of lending are acceptable depending on the specifics of the project;
- a loan can be provided to finance previously incurred costs or refinance existing debts to others credit organizations raised to finance investment costs.
Risks of hidden lending for investment projects from short-term sources
In the case of attracting short-term loans with the expectation of a subsequent prolongation or “re-lending” (since “short” loans are easier to obtain, fewer documents, and so on) to finance long-term goals, the borrower risks in the future or not to receive a loan on the same conditions, or, even more dangerous, to be denied the next loan.
In the event that the goals of the enterprise correspond to the attracted investments, both in terms of quality and timing, the borrower receives a guaranteed invariability of lending conditions for the period of the project (provided that there are no force majeure circumstances). Also, the benefit for the borrower is to reduce the cost of registration of collateral (especially requiring registration) under long-term loan agreements compared to short-term ones, which require payment for the registration of each encumbrance. In addition, with long-term investment lending, organizational costs, labor and time costs for collecting documents for processing and prolonging short-term loans are reduced.
When lending to individuals, a procedure for assessing their creditworthiness is also carried out, which can be carried out on the basis of the borrower's income level, a study of his credit history, as well as a standardized scoring. The borrower's creditworthiness is assessed by income level based on income data individual and the risk of losing that income. Income is determined on the basis of salary certificates or a tax return, after which it is adjusted to take into account mandatory payments and bank risk ratios. Credit history is information about the receipt and repayment of loans by a potential borrower in the past. In order to form credit histories, credit bureaus are created and operate in countries. Scoring is a mathematical or statistical model by which, based on the credit histories of other customers, the bank tries to determine how likely it is that a particular potential borrower will repay the loan on time. In its most simplified form, the scoring model is a weighted sum of certain characteristics, as a result of which an integral indicator is formed. This indicator is compared with a certain numerical threshold, which, in essence, is a break-even line and is calculated from the ratio of how many clients, on average, who pay on time, are needed in order to compensate for losses from one debtor. A loan is issued to those clients whose integral indicator is above this line. Thus, scoring does not answer the question why the borrower does not pay. He highlights those characteristics that are most closely related to the unreliability or, conversely, the reliability of clients of a certain age, a certain profession, education, the same number of dependents, etc. This is the discriminatory nature of scoring: a person who is formally close to a group with a bad credit history will most likely not be able to get a loan.
Project finance- this is the financing of investment projects, in which the source of servicing debt obligations is cash flows generated by the project. The specificity of this type of investment lies in the fact that the assessment of costs and income is carried out taking into account the distribution of risk between project participants.
Project financing is a method of attracting long-term debt financing for large projects through "Financial Engineering", based on a loan against cash flows generated only by the project itself, and is a complex organizational and financial event for financing and monitoring the implementation of the project by its participants.
Project finance is a relatively new financial discipline that has become widespread in the developed countries of the world over the past 20 years and has been actively used in Russia over the past 10 years. Project finance has its own specific advantages, which makes it different from other forms of finance. It differs from syndicated lending in that it is not impersonal, but targeted. From venture financing - that is not accompanied by high risks that always accompany the development and implementation of new technologies and new products. Project finance deals with more or less known technologies. The implementation of such projects is more predictable than the implementation of innovative ones. But here, too, there are risks that are of a specific nature, due to the tasks of project implementation (delay in putting an object into operation, an increase in prices for raw materials and materials, exceeding the construction budget, etc.). The main advantage of project financing is that it allows you to concentrate significant financial resources on solving a specific business problem, significantly reducing the risk due to the significant number of participants in the agreement.
The structures of project financing may differ depending on the specifics of project financing, the specifics of the purpose of the project, as well as on the type of agreement (contract) that is the basis for financing. But there are general principles underlying the project finance method: Project finance is used to finance a relatively “separate” project (from a legal and economic point of view) through a legal entity specializing in the implementation of this project (often a separate entity is created to receive and use project finance, so called the design company); As a rule, more often, project financing is used for a new project than for an already established business (usually used in debt restructuring); The source of return on invested funds is profit from the implementation of the investment project (separated from the financial performance of the project initiators). The share of attracted capital in the total amount of project financing is 70-80% (large "financial leverage"); For loan capital of project financing, investors do not provide collateral or guarantees, or the collateral or guarantees do not fully cover the financial risks of the project; Lenders, when paying interest and debts, rely mainly on the receipt of funds from the project (future profit), and not on the value of the assets and financial performance of the company. The main guarantees for lenders are company contracts, licenses and exclusive rights to use and develop valuable assets, or technologies and production of competitive products. The project has a limited life span - the duration of the contract or license for the types of work or the development of assets, the period of commissioning of facilities or structures, the start of serial production.
Financing with full recourse to the borrower:
It is used, as a rule, when financing medium-sized, unprofitable projects. In this case, the borrower assumes all the risks associated with the implementation of the project;
financing without recourse to the borrower:
provides that all risks associated with the project are assumed by the lender. These projects are the most profitable and attractive for investment, giving competitive products as a result of the project;
financing with limited recourse to the borrower.
the most common form of funding. All participants distribute the risks generated by the project, therefore, everyone is interested in the positive results of the project at all stages of its implementation.
1) design company. It is created specifically for the project, is responsible for its implementation and usually does not have any financial history, no property for collateral. It is the use of a project company that is the main distinguishing feature of this type of project. Responsibility and risks for invested capital are not assigned to a proven and reputable enterprise, but, like financing, are distributed in a complex way among the participants in the process and are regulated by a set of contracts and agreements.
2) an investor who invests in the equity capital of the project company. The investor, on the one hand, is rarely limited to cash deposits and making a profit, and on the other hand, especially when there are several investors, their investments in general may not consist in financial injections. Such investors initiate a project, create a project company and in one form or another expect to benefit from its successful activities.
3) creditor. In addition to the fact that the project company receiving the loan has neither collateral nor guarantors in the traditional sense of these terms, the share of debt capital in project financing is much higher than in conventional corporate loans and the average amount provided by the lender is 70-80% of all capital costs of the project. It is clear that this puts the lender in difficult conditions and requires him not only to search for alternative ways to protect his capital, but also to analyze all the subtleties of the funded event with particular care.
If there are not enough own funds for the implementation of the investment project, you can resort to project financing. Such a loan will be repaid at the expense of income from the operation of the investment object, which is quite convenient. Project finance services are provided by both Russian and foreign banks. It is important for the financial director to clearly understand the features of issuing a loan for a project and the terms of financing in various banks in order to choose the best option for his company.
Project financing is a method of long-term lending, in which funds are attracted for a specific investment project, the payment of interest on the loan and the servicing of the principal debt is carried out at the expense of the cash flows generated by the project, and the loan is secured by its assets. It is relevant to use project financing in situations where funds are needed at the construction stage, as well as when the owner does not want to transfer project risks to other assets owned by him. One of the advantages of this form of lending is that in case of default on the loan, the bank is not entitled to impose a penalty on other assets of the project initiators.
In world practice, project financing is widely used in the construction of facilities commercial real estate(development), industrial enterprises, ships, planes. In Russia this financial service took root only in development: most domestic banks consider investment lending too risky, so they require the borrower - the initiator of the project to provide additional security at the expense of the core business.
According to Pavel Gurin, Deputy Chairman of the Board of ZAO Raiffeisenbank Austria, the project financing service is in demand by many companies. Large-scale infrastructure projects are financed under this scheme, and transactions are organized by international financial institutions (EBRD, IFC) with state support.
Personal experience
Natalya Matsyuk,
Our company has been using project financing for several years for construction residential buildings and offices. Compared to other types of lending, project financing has a number of advantages.
Firstly, there is no need to divert significant own funds for the implementation of the project.
Secondly, it is possible to get cash for a long period, in our case - an average of two to three years, which corresponds to the construction and implementation of an 18–24-storey residential monolithic-brick house (for office centers, the time frame is 7–10 years due to more long term payback).
Thirdly, the construction of the facility is guaranteed to be financed within the predetermined time frame. The advantage of project financing is that the facility under construction is the collateral for the loan. At the same time, for some banks it is necessary to register it as a construction in progress, evaluate and pledge it, while others require the transfer of rights to apartments under construction and land plot under the object.
Where to apply for a loan
Depending on the level of requirements for borrowers, interest rates and the complexity of the loan processing procedure, the following groups of banks providing project financing can be distinguished:
Since the author has experience in obtaining project financing for development in foreign banks, we will consider in more detail the conditions under which these banks work with Russian companies, and compare them with the conditions in Russian banks.
Getting Funding
Work with banks to attract financing should be started already at the stage of preparing the business plan of the project.
As soon as the business plan and feasibility study of the project are ready, you can submit documents. It should be noted that the more complete the package of documents submitted initially by the borrower, the higher the probability of a positive decision of the credit committee.
Personal experience
Mikhail Ilyin, Director of the Investment Projects Evaluation Department, CJSC NEO Center (Moscow)
A company applying to a bank for project financing usually requires the following set of documents:
The bank will treat the borrower more favorably if the documents are prepared or certified by consulting companies and law firms with a worldwide reputation (Jones Lang La Salle, Knight Frank, Cushman & Wakefield, etc.).
Personal experience
Natalya Matsyuk, Chief financial department OOO SIK Development-South (Krasnodar)
Banks' requirements for a set of documents vary, but in general they can be divided into two groups. The first is legal and financial documents relating to the company and its business. The procedure for checking this group of documents is much easier if the company is already cooperating with the bank and periodically reports to it on its financial condition.
The second group is documents related directly to the project. They need to pay special attention, carefully work out a business plan or a feasibility study of the project. Conduct market research for the future facility, provide budget estimates and documents necessary for construction expertise (legal and project documentation, description of the composition of the project participants - investors, general contractor and subcontractors, suppliers of materials, equipment). But the key success factor is still the financial model of the project.
Loan decision making process
Alexander Meshcheryakov,
Head of Department for Structural and Project Financing, OJSC MDM-Bank (Moscow)
In our bank, the procedure for obtaining project financing includes two stages. At the first stage, the borrower submits to the bank a business plan, a financial model and an independent analysis of the market in which he is going to work. If the project is of interest to the bank, and the documents comply with the principles of the accepted credit policy, then a detailed list of documents that the client is required to submit additionally is compiled.
This list depends on the specific project and the industry in which it is planned to be implemented. As a rule, it includes design permits, financial documents, as well as documents confirming the ownership of land plots buildings, long-term contracts (for the supply of equipment, a construction contract, etc.). At the same stage, the main conditions for the bank's participation in the project are discussed and indicative terms of financing are signed. (term sheet).
At the second stage, based on the submitted documents, the bank analyzes the project according to the following criteria: initiators (sponsors) and project management; availability of sufficient own funds of sponsors; satisfactory legal structure of the project (collateral and permits); the project has long-term competitive advantages; forecasted situation in the industry; financial model of the project and availability of additional collateral (credit enhancements). If the project satisfies the bank's requirements for all of the above criteria, then a decision will be made to allocate funding.
Olesya Slutskaya,
Head of Project Financing Department, URSA Bank OJSC (Novosibirsk)
Our project financing procedure goes through three stages. At the first stage, the compliance of the project with the basic conditions is assessed: financing by the initiator (borrower) of 15% of the total investment in the project, provision of collateral for the entire amount of the loan, availability of approved design estimates and permits, operating business of the project initiator, the ability to service the loan in the investment phase of the project at the expense of the results of current activities, the availability of a business plan or a feasibility study of the project, as well as the possibility of the initiator to act as a guarantor for the project.
At the second stage, an express analysis of the project is carried out, after which the bank formulates the main conditions on which it is ready to participate in this project.
The third stage includes an analysis of the entire package of legal and financial documents and a credit examination of the project, after which a decision is made on financing the project. If the bank assesses the level of risk for the project as acceptable, it opens financing. On this, his work on the project does not end: throughout the entire period of financing, constant monitoring of the implementation of the project is carried out. Depending on the degree of readiness of the documents required by the bank for project analysis, consideration of the application may take from 30 to 60 days.
As for the interest rate, we apply the so-called "success fee": for the period of investment, a standard loan interest is set, and after the commissioning and commissioning of the object, the previously agreed commission is paid to the bank.
It takes an average of one or two weeks for bank specialists to familiarize themselves with the documents, after which the bank may invite the borrower for an additional interview on the project.
In addition to documents, the bank will require the borrower to fulfill certain conditions, in particular:
After signing a letter of intent containing a list of basic loan conditions (term sheet), the funding request is submitted for consideration credit committee. After a positive decision, the borrower re-signs term sheet. From this moment, the bank is obliged to sign the contract and provide financing. In the event of termination of the contract at the initiative of the borrower, the latter is obliged to compensate the bank for the costs of lawyers and other external consultants.
Even if the bank has already made a decision on the allocation of financing and signed loan agreement, then the funds will be credited to the borrower's account only after the fulfillment of the so-called suspensive conditions, in particular, the provision of signed contracts with buyers and tenants, the submission of documents for registering a pledge of real estate.
Personal experience
Alexander Meshcheryakov, Head of the Department for Structural and Project Financing, OJSC MDM-Bank
Suspension conditions are determined individually for each project and depend on its specifics. Most often they include the availability of expert opinions on the construction part of the project; completion of registration of permits; registration of pledges for lands, structures involved in the project; conclusion of after-take contracts (contracts for a certain volume of products planned for release, usually from 50% or more, for example, contracts for the purchase of at least 50% of apartments in a building under construction, for the lease of at least 50% of the space in an office center, etc.); contribution by the borrower of own funds to the project in a certain amount.
Interest rate and loan term
The interest rate on a loan should theoretically correspond to the level of riskiness of the project, but in practice banks do not always follow the rule “the higher the risk of the project, the more rate on credit."
If the bank assesses the risk of loan default as too high, it will most likely refuse to finance the project. If the risk is small, but at the same time the borrower claims an interest rate that is too low for the bank, the probability of refusal is also high. In other cases, the loan rate depends on the conditions under which the bank itself raises funds, as well as on financial indicators, the scale of the project, the business reputation of the borrowing company and the skill of conducting business negotiations by its financiers. According to the author's experience, in the course of negotiations, the bank can make a concession and reduce the loan rate originally offered by it by 0.5%.
Personal experience
Pavel Gurin, Deputy Chairman of the Board of ZAO Raiffeisenbank Austria
There are no standard rates for project finance. We determine the terms of lending for each specific project, depending on many details: sponsors, borrower, amount and duration of the project. I would like to note that the main mistake of developers is that the issues related to the concept of the project, risk analysis (especially legal ones), as well as the exit strategy from the project have not been fully worked out.
Banks usually link the term of a loan to a lease agreement, for example, a lease for ten years and a loan for the same ten years. Banks often seek to extend loans beyond the payback period of the project in order to increase the likelihood that the loan will be repaid through future cash flow. If long-term lease agreements are not concluded for the same period, then a medium-term loan is provided with a “ball” (one-time) payment at the end of the term in the amount of 50% of total amount. As a rule, at the end of the contract, such loans are refinanced by the same bank.
Personal experience
Natalya Matsyuk, Head of the Financial Department, SIK Development-South LLC (Krasnodar)
If the bank, guided by the methodology adopted by it, assesses the level of project risks as high, then the loan rate may increase by 1-2%, or additional guarantees or guarantees will be required. From experience, I can see that during the construction of residential facilities, loans are attracted on the following conditions: the amount of the loan is 200-300 million rubles. for a period of 2.5–3 years at a rate of 11.5% per annum, the object under construction is pledged, the ratio of funds contributed by the bank and the borrower is 70 to 30.
Sometimes a suspensive condition for obtaining the rest of the loan is the registration of collateral with the registration authorities. As a rule, banks have internal restrictions on the maximum loan term, but in any case, this issue should be discussed.
Since credit rates are falling in Russia, after completing the construction of an object, it is worth thinking about refinancing the loan. Western Bank can provide a loan for a ready-made property with concluded lease agreements at a rate of 8–8.5% for 15 years. To obtain, you will need a package of documents similar to that described above. And if the first loan was obtained from a Western bank, then the refinancing procedure will be much simpler, since the potential risks were analyzed in detail at the first stage.
barriers
Although Western banks finance projects at lower rates than Russian ones, it would be a mistake to assume that the loan will generally be cheap. The cost of preparatory procedures, paperwork, conclusions can be up to $500 thousand, which, according to the author, is justified only with a loan of more than $50 million. Then, provided that the construction lasts two years, these costs will amount to 0.5% per annum. They can be considered acceptable, because if the bank provides financing at 9-10% per annum, then the effective lending rate will be 9.5-10.5%. However, if the same $500,000 is spent on a two-year loan of $10 million, then the increase effective rate will be significant - by 2.5%.
It should be noted that the lending process in foreign bank may be significantly delayed. For example, if a bank has no experience in working in Russia, then its specialists will need a lot of time to figure out the intricacies Russian legislation, correctly structure the transaction, decide on what interim measures it makes sense to apply for.
If the borrowing company considers the above conditions for obtaining a loan from a Western bank too complicated, then there is always an alternative - contact the Russian representative office of a Western bank or Russian bank. However, it is also necessary to prepare for the decision possible problems.
Personal experience
Natalya Matsyuk, Head of the Financial Department, SIK Development-South LLC (Krasnodar)
Concerning the financing of one of the construction projects residential complex worth more than $200 million, our company applied to the EBRD. We drew up a detailed business plan, collected all the necessary design estimates and permits, worked out a financial model, thought out a scheme for creating an SPV company 3 through which we planned to conduct all cash flows, transferring its shares to the bank as collateral. But Russian enterprises for foreign banks are at high risk, so they overestimate the requirements for profitability.
So, in addition to receiving interest on the loan, the bank insisted on participating in future profits on the project, providing itself with a yield of at least 20%, which is significantly higher than the current rates on loans in Russian banks. In addition, the bank demanded that the sale of completed apartments begin only after the completion of the entire complex, and not one by one of each house. For us, this was unacceptable, and in the end we settled on cooperation with Russian banks.
In our country, the project finance market has good prospects, but so far getting money for projects in Russian banks is not easy and quite expensive. And banks often insist on onerous conditions for companies and seek to control the progress of the project, unwittingly interfering in economic activity.
Personal experience
Andrey Krivenko, Financial Director of Agama Group of Companies (Moscow)
From my own experience, I note that the procedure for obtaining an investment loan in Russia is too complicated, banks make excessively high demands on borrowers. So, they may require the registration of an object in government bodies, while in practice construction is carried out in parallel with the registration procedure, therefore, the need for investment arises much earlier.
It is not easier to fulfill other requirements of the bank - to work only with the general contractor approved by the bank, to increase the minimum amount of the authorized capital up to the amount of the loan, to register the land as security and insure it for all occasions, to pledge the company's shares and change its organizational structure. legal form from LLC to CJSC, etc., etc. At the same time, the terms of project financing cannot be called attractive: credit rate from 15% for 1.5-2 years.
True, if a company is a key client of a small bank, then it can count on greater loyalty, although lending conditions are unlikely to improve significantly. Our company eventually abandoned project financing in favor of loans secured by the constructed and commissioned facility, and at the time of construction secured by other real estate.
If the bank has made a decision to finance the project and has even transferred the first tranches, it is too early to relax. Having identified any technical or financial violations in the process of project supervision, the bank may suspend the following tranches, or even demand back previously disbursed amounts. Therefore, it is important not only to successfully start, but also to complete the project.
1 The lending rate refers to the nominal interest rate on the loan, excluding all costs associated with its receipt. - Note. author .
2 KYC (know your client (customer) - translated from English "know your client") - banking procedure verification of the client, during which the biography and reputation of the owner of the company, ways of additional financing of the project are carefully studied, the source of the origin of his money is clarified, the reliability of the information submitted to the bank is checked, etc. - Note. editions.
3 SPV (special purpose vehicle) - a special purpose company (subsidiary or trust) created to perform some task and usually has a limited period of existence. - Note. editions.
Investment project lending is not identical to long-term lending, although it also provides for a fairly long period of use of credit resources, in contrast to short-term loans, which involve
First of all, lending by banks to investment projects is characterized by the presence of a financed project, both new and already existing, for the implementation or development of which the credit funds attracted by the borrowing enterprise will be directed. In this case, the investor bank assumes certain risks associated with the implementation of the funded project. And the decision in favor of lending to such a project will depend on the planned income received from the project. Naturally, with such an option, the current situation in terms of the financial condition of the enterprise, the size of its profit, the growth dynamics of indicators, stability, creditworthiness, and solvency of this enterprise will be taken into account without fail. But the investment project itself will also play a significant role. When lending investment projects, special attention is drawn to the result predicted from the implementation of the project into action.
Rossiyskiy Kredit Bank finances investment projects that provide for the reconstruction, modernization, expansion of existing and creation of new production enterprises, both large and medium-sized businesses.
The provided loan can be used for the following purposes:
Magnifications production capacity;
- financing costs for overhaul technical re-equipment;
- acquisition of movable property, as well as real estate;
- refinancing loans.
The amount of the loan limit can be more than 100 million rubles. Financing is provided in the form of a loan/credit line. The loan term can be up to 5 years. The debt repayment schedule is drawn up by agreement of the parties. The loan rate is set individually for each borrower.
The following can be pledged as collateral for a loan:
Land rights (property, long-term lease);
- real estate objects;
- property rights;
- shares/participatory interests, incl. assets that are not related to the investment project;
- guarantees of solvent companies;
- bank guarantees.
Bank lending to investment projects most often assumes that borrowers who: are legal entities registered in Russian Federation or performing operations or having assets in the Russian Federation; have a period of actual business operation - at least 2 years; have the necessary licenses and certificates.
Efficient lending to investment projects involves a different organization of the bank than simple lending. For example, many banks practice visiting a future borrower, even when considering a regular loan application. Thanks to this, the bank's specialists mainly get acquainted with the financial documentation of the enterprise. But, when considering the issue of lending to the implementation of investment projects, much more is often required, namely, it is a question of conducting a comprehensive survey of the enterprise in order to establish the level of riskiness of issuing funds. Such a survey of the enterprise is carried out in terms of the presence of possible risk factors.
When making long-term investment lending, you do not need to place high hopes on various standard types of loan repayment security. The most reliable security in the case when banks lend to investment projects is considered to be a fully developed investment project, as well as a high-quality business plan for its implementation. They reflect the actual state of the enterprise with all the existing risks and even more reliable than the future state of the business, which they aim to achieve. A skilled analyst can learn quite a lot from such sources. The partial information provided in them or its complete absence may also testify to an experienced specialist about the actual situation in the enterprise.
Evgeny Malyar
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Business loans
Since the basis for issuing a loan is a business project, the bank actually shares potential risks with the borrower.
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Probably every business owner has ideas about how to increase profits. Implementation large-scale project requires investment. The most common solution to this problem involves external lending. Investment loans pursue the main goal - bringing the enterprise to a new level of development. An article about their essence, features, shortcomings, who can access a loan for investment goals and how to get it.
An investment loan is a special kind banking product, characterized in that the person applying for it has a well-developed project for the use of borrowed funds.
An investment loan has special features:
The project should include three main sections:
Based on the nature of the intended use of the loan, it is determined that it belongs to one of the three main types.
Designed to expand the scale of an existing enterprise. Tasks solved by the company with the help of an expansionary investment loan:
The peculiarity of its receipt is that until the debt is paid off, the effect of improving the financial performance of the enterprise should not be calculated. All the additional profit brought by modernization (and in some cases a large amount) will go to settlements with the bank.
When applying for an expansion loan, forecasts are based on the most pessimistic scenarios for the development of further events. Ultimately, only the bankruptcy of an enterprise can hinder the fulfillment of the payment schedule. If it is assessed as probable, the loan will simply not be issued. In the best case, the interest will be set at the maximum level.
Bank risks in this type of investment lending are initially the highest. Project lending provides for the development of one of the directions, separate from the main activity carried out by the enterprise at the time of application. The leaders of the company, acting as a probable debtor, hope to significantly increase the profitability of the business after the implementation of the plan.
Financing investment projects is always an adventurous business. The bank's income is formed only by the profitability of the new direction. The credited enterprise simply will not be able to fulfill its obligations under the contract if the project does not give the expected effect.
An enterprise can apply to a bank with an application for a construction and investment loan only after it has incurred certain and considerable costs. This feature is due to the specifics of the activity for the construction of real estate. Negotiations are possible if the prospective developer already owns the relevant piece of land or has a long-term lease on it.
In addition to the areas, the applicant will have to present the design and estimate documentation, the development of which costs a lot of money. Of course, a building permit is required.
The probability of refusal when applying for a construction and investment loan is low, but it is available only to enterprises with high financial potential. The decision on approval and conditions is made by the bank based on the type of facility being built and an assessment (again, pessimistic) of its likely profitability.
The standard criteria by which a bank makes ordinary financial borrowing are in this case supplemented by some specific requirements.
Investment loans for small businesses are often a way to reach medium or even high level business activity, but it is not easy to overcome the boundaries separating an individual entrepreneur from an LLC.
Since we are not talking about small amounts in this case, the need for a clear and convincing business plan that reveals the purpose of the project comes first. In addition, the following developments are needed:
The features of investment loans include a repayment period that almost never exceeds ten years. One should also take into account the cautious attitude of the bank to applications for project refinancing. If the debtor failed to pay off the primary loan, then the estimated profitability as a result did not live up to expectations. At least, that is the conclusion.
According to the source of financing, investment loans are represented by five main forms:
This brief table requires some explanation, indicating the specifics, advantages and disadvantages of each form of investment lending.
A bank investment loan is the most commonly practiced form of capital raising. Availability works in its favor first of all. As the name implies, it is provided to the borrower in commercial banks subject to the conditions described above.
In turn, it has several varieties, determined by the terms of contracts and other conditions:
Of these categories, only the concept of "underwriting" needs comments. It is similar to the bond form, but in this case, the creditor bank acts as the buyer of securities. Of course, only consistently high characteristics of issued bonds can induce such actions.
Investment lending by the development bank, that is, in fact, by the state, is made when the project is of priority importance for the country's economy. Conditions are usually preferential, but they still need to be earned. The objects of public investment are projects that meet high requirements, including:
In other words, if as a result of the implementation of the project in Russia the production of a product based on modern technology without harm to the environment, which is in demand in the domestic and foreign markets, is started, then one can count on state investment.
The requirements for foreign investors attracted as part of international investment are very high. However, there are several effective ways to interest foreign entrepreneurs in investing in domestic production. Among them are a favorable tax climate, highly qualified labor resources and other benefits Russian economy. The main "trump card" is a tempting project that promises high profits.
A synonym for the term "commodity form of investment" is the word "leasing". By providing an enterprise with a fixed asset on the basis of a financial lease, the lessor creates conditions for the growth of labor productivity, improving the quality and all indicators of the enterprise.
Leasing can be financial and operational, direct and reverse. This method of economic borrowing, and in fact, investment, deserves a separate detailed description.
Finally, the fifth and last method of attracting investment lending is the issuance (issue) of securities, namely, bonds that guarantee a stable income in the form of interest. In this they differ from shares, the value of which depends on stock quotes and the success of the financial performance of the issuing enterprise.
The advantage of issuing bonds for an enterprise is that the investment is made directly from the buyer of the security. The bank, before issuing a loan amount, must first find it, attracting depositors with interest on the deposit.
There are also difficulties. The main one is the search for those who want to buy bonds. This is not easy: each acquirer must be convinced that the project will be profitable.
You should immediately accept the fact that it is impossible to predict the economic effect of the implementation of almost any project with 100% accuracy and reliability. This, however, does not mean the meaninglessness of the very preparation of a business plan. The maturity and interest of an investment loan always depend on how convincing the applicant's arguments are.
A common method used by banks is to draw analogies between design parameters and the known characteristics of existing counterparts. If the introduction of some equipment brought a certain enterprise a monthly additional income, for example, 100 thousand rubles, and all other conditions (location, form of ownership, turnover, etc.) are approximately equivalent, then we can assume the same effect after the investment.
Another forecasting method is based on the calculation of the ROI. Its disadvantage is in direct proportion to the difficulties associated with determining the expected profit. The calculation formula is as follows:
Where:
ROI- indicator of return on investment;
VP- gross revenue for the conditional reporting period;
VD- gross cost for the conditional reporting period;
VI- the amount of investment.
Everything is clear here: the ROI indicator shows how much profit each ruble invested in the project brings. Questions arise later.
Gross revenue VD is formed by the unit price of the product and the sales quantity. If an entrepreneur who wants to get an investment loan claims that he will sell each copy at a price of, for example, 100 rubles, and its cost will be 60 rubles, then it may make sense for him to believe. Doubts arise when determining the market capacity, which can be determined by conducting large-scale marketing research or experimentally, that is, after the fact.
The slowdown in sales leads to a decrease in the capital turnover ratio, and, as a result, to a deterioration in real financial indicators in comparison with the planned values. Based on this, banks, as a rule, reduce their forecasts to a reasonably pessimistic level when establishing a payback period and profitability. Accordingly, these indicators affect the term of the contract and the interest rate.
After the commissioning of a new technological line, the Rassvet enterprise will introduce to the market New Product"Dewdrop".
Rassvet has its own funds in the amount of 2 million 400 thousand rubles, and intends to spend this money on the purchase of this equipment.
The required amount of investment credit is 19 million 600 thousand rubles.
The business plan states that with these characteristics monthly income will be:
Using the tax calculator, you can calculate that with expenses for:
the amount of monthly profit remaining for business development after taxes will be 629,651 thousand rubles.
The payback period of the investment To will be:
