Frequently Asked Questions 2017-09-22T18:54:11+00:00

Frequently Asked Questions

Trade Finance, Commodity Finance And Project Finance FAQ

Frequently Asked Questions

Can you monetize financial instruments that I inherited? 2017-09-18T13:48:26+00:00
If I proceed with monetizing some financial instruments, am I free to do what I want with the money or am I somehow obligated to do certain things with the money? 2017-09-18T13:47:03+00:00
If I proceed with monetizing some financial instruments, do I have any continuing liability or is the transaction fully settled? 2017-09-18T13:45:07+00:00
What are the hidden risks or pitfalls involved in monetizing financial instruments? 2017-09-18T13:45:40+00:00
How long does it take to monetize financial instruments? 2017-09-18T13:43:07+00:00
What are the fees involved in monetizing financial instruments? 2017-09-18T13:41:51+00:00
What does it cost to monetize financial instruments? 2017-09-18T13:38:16+00:00
What types of financial instruments can be monetized? 2017-09-18T13:17:15+00:00

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What is a financial instrument? 2017-09-18T13:10:23+00:00

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What are financial instruments? 2017-09-18T13:26:23+00:00

Financial instruments are

What are the different types of financial instruments? 2017-09-18T11:46:34+00:00
What does due diligence entail? 2017-06-07T14:32:05+00:00

We perform documented due diligence on project stakeholders including directors, shareholders and senior managers. We make wide-ranging inquiries concerning the stakeholders who are required to answer and sign a questionnaire which we make available to lenders. We usually perform our due diligence service at our own cost and therefore at no charge to you. 

When does due diligence occur? 2017-06-07T14:29:50+00:00

Due diligence typically occurs at the same time as the project financing process.

 

Will you invest financially in my project? 2017-06-07T14:07:21+00:00

If the lenders do not appoint us as loan supervisors we may join the lending syndicate.

 

Are you interested in entering a joint venture at the start of a project? 2017-06-07T13:54:32+00:00

No. Lenders would not regard us as being independent from you if we entered a joint venture with you.

 

Do you contribute to project development costs? 2017-06-07T13:45:41+00:00

No. Lenders would not regard us as being independent from you if we took a stake in your project.

 

Do you accept finance provision fees from me before finance is placed with my project? 2017-06-07T13:42:39+00:00

No. Lenders would not regard us as being independent from you if we received finance provision fees from you before finance is placed with your project.

 

When do you receive your project finance provision success fee from me? 2017-06-07T13:40:16+00:00

We receive our finance provision fee success fee from you only when finance is actually placed with your project.

 

Why do you maintain independence from me and the investors during the project financing process? 2017-06-07T13:37:36+00:00

To have the necessary confidence to invest, lenders must have complete confidence that we are presenting them with a fair, accurate, objective and independent evaluation of your project.

 

Do you act on my behalf or on the investors’ behalf during the project financing process? 2017-06-07T13:26:28+00:00

Neither. We maintain very strict independence from you and from the lenders during the project financing process.

 

How long does it take to finance a project? 2017-06-07T13:24:02+00:00

The time required to finance a project varies greatly from project to project and is primarily determined by the project’s scale, complexity, nature, marketability, the prevailing economic conditions and the readiness of the project to go to market.

 

What is the likelihood of you providing me with the required project financing? 2017-06-07T13:21:36+00:00

The likelihood of a project being financed depends on project viability, projected profitability, the quality of the project documentation, prevailing economic conditions and other factors.

 

Do you guarantee providing me with the required project financing? 2017-06-07T13:20:00+00:00

No. Every project has an element of risk.

 

Am I required to supply the lenders with financial guarantees? 2017-06-07T13:14:21+00:00

No. You are not usually required to supply financial guarantees to the lenders.

 

Do the lenders require you to financially guarantee my project? 2017-06-07T13:07:55+00:00

Yes. When we approve a project, the lenders usually require us to provide financial guarantees for the first three years of your project’s operation. If the project fails to meet its financial objectives as defined in the feasibility studies and business plan, the lenders are legally entitled to retain the guarantees we have provided in compensation. It is therefore essential that we have complete confidence in the accuracy of the project documentation.

 

How do the lenders know that the information in my project documentation is accurate and reliable? 2017-06-07T13:05:00+00:00

The lenders require us to independently analyse and where appropriate approve your project documentation.

 

What happens after the syndicate is formed? 2017-06-07T13:00:15+00:00

After the syndicate is formed we typically offer you a number of loan proposals.

 

When is the syndicate formed? 2017-06-07T12:58:20+00:00

The syndicate is formed after your project documentation has been completed, verified and approved by us.

 

Who are the members of the lending syndicate? 2017-06-07T12:54:57+00:00

The syndicate is typically composed of a variety of investors including hedge funds, institutional investors, government investors, private investors, investment banks, investor groups, money market funds, mutual funds, pension funds and venture capital firms selected from our private database of professional investors and lenders. We have associates who are retained by national banks and financial institutions as project advisors.

 

How do you provide project finance? 2017-06-07T12:55:11+00:00

We form a syndicate comprising a number of professional international investors and lenders. From the investors’ viewpoint, the advantage of being a member of a syndicate rather than the sole investor is that it spreads the risk for the project and each investor can see that other investors have independently concluded that the project is viable and profitable.

Do you provide bridge finance? 2017-06-06T15:48:24+00:00

No. We are not interested in projects which need bridging finance.

 

Do you refinance projects? 2017-06-06T15:47:23+00:00

No. We are not interested in projects which have already received finance but which need to restructure their finance.

 

Do you finance projects that are acquiring existing projects? 2017-06-06T15:46:18+00:00

No. We do not finance acquisitions of projects which are already operating.

 

Do you finance projects that are just land acquisitions? 2017-06-06T15:45:16+00:00

No. We are not interested in financing the purchase of land when the project does not include developing the land.

Do you finance projects in which construction has started? 2017-06-06T15:43:58+00:00

No. We do not get involved in projects which are under construction.

 

Do you finance projects which have no equity? 2017-09-02T03:22:39+00:00

No. In the current economic climate we expect all project finance applicants to put equity into their own project.

 

What is the minimum project financing you will provide? 2017-06-06T15:42:05+00:00

No. Our lower threshold to consider a project for financing is $5,000,000.

 

In which countries will you absolutely no provide project finance? 2017-06-06T15:41:11+00:00

Currently, we are not considering projects in a number of countries including Afghanistan, Iraq, Nigeria and Palestine.

 

In which countries will you provide project finance? 2017-06-06T15:40:02+00:00

We will consider projects in most countries including those listed on our project finance territories page.

 

Do you finance projects which do not have a significant construction component? 2017-06-06T15:38:59+00:00

Only very rarely do we consider projects which do not have a construction component.

 

What factors do you consider when evaluating a project for financing? 2017-06-06T15:37:20+00:00

Political and economic stability of the country in which the project is to be based, likely return on investment, market saturation, geographical location, site accessibility and many other factors.

 

What types of projects are you interested in financing and developing? 2017-06-06T15:36:20+00:00

Our core business is financing and developing hotels, resorts, theme parks and other tourist-based land development projects but we also consider construction projects in a broad range of other industries including residential housing, commercial property, transport, manufacturing, energy, agriculture and mining. To interest us, a project must usually have either a unique selling proposition or a strong combination of supporting factors.

 

Can the deal proceed while the project documentation is being prepared? 2017-06-05T23:43:46+00:00

The deal always proceeds. During document preparation, we begin our due diligence procedure and underwrite the project financing.

My project is viable but my resume lacks management and operational experience. Can you help me? 2017-06-07T12:32:25+00:00

Yes, we can help. You are right to be concerned. International project lenders are risk averse and will not invest in projects that don’t have sponsors with strong operational and managerial experience. We can provide management personnel with strong industry experience and can incorporate them into the project documents if we are preparing them. This will strengthen investor and lender confidence in the project because their investment will be protected by experienced and proven managers. The provision of project personnel is subject to contract.

 

Should I have a material disclosure statement in my project documentation? 2017-06-07T12:33:49+00:00

Yes, project documents should always include a material disclosure statement affirming that you have not furnished the data for the market feasibility study or the financial feasibility study. Affirmations such as these give potential investors confidence in the financial data used in the core project studies, and in the independence and objectivity of the studies.

 

How is the data for the financial feasibility study derived? 2017-06-07T12:34:06+00:00

For financial feasibility studies to be credible they must be based on data derived from the real-world cash flow performance of comparable existing projects, not unsupported assumptions. Financial feasibility studies based on assumptions instead of comparable real-world data carry no weight with international investors. To qualify for financing, your project must present realistic revenue, expense, profit and cash flow forecasts and must be able to demonstrate an acceptable internal rate of return.

 

What are the costs to produce project documentation? 2017-06-06T00:00:57+00:00

The cost of developing project documentation varies widely depending on the scale, nature, and complexity of the project. It is a significant expense but is necessary to secure financing and likely improves the profitability of the project.

 

Do you only approve projects with high quality documentation? 2017-06-07T12:34:17+00:00

We only accept project financing engagements with high-quality, well-written documentation. International investors and lenders rarely approve projects with poorly written, inaccurate, incomplete or unsupported documentation. It is not possible to raise international project finance with inadequate documentation and therefore we only approve projects supported by international investment standard documentation.

 

My project documentation probably doesn’t meet your standards, will you consider approving my project for financing? 2017-06-06T15:21:00+00:00

Absolutely not. It is impossible to secure a commitment for Project Financing with inadequate or subpar documentation. Because the likelihood of securing financing is nil we will not accept an engagement to place project financing if it does not have high-quality documents. To proceed further, you must develop high-quality, well-written project documentation or engage Global Trade Funding to develop the project documentation.

 

My project documentation was prepared by an accountant, is this sufficient to secure project finance? 2017-06-06T15:31:52+00:00

It is doubtful. Project documentation must be of sufficient quality to convince the world’s most sophisticated investors to finance your project and we know of no way of doing that without high-quality, well-written project documents.

What mistakes are made by project sponsors who have never developed a significant project before? 2017-06-06T15:39:24+00:00

A common error made by project sponsors who have never developed a significant project before is they attempt to package the project for financing with project documentation developed by consultants with whom they are comfortable, rather than established consultants with international reputations. It is natural to want the documentation to appear as favorable as possible but is much more important to develop documentation that is realistic and upon which international lenders and investors can rely.

I have not yet prepared project documentation, should I hire consultants to write it now or should I contact you first? 2017-06-06T15:47:04+00:00

You should absolutely contact us first. It is a tremendous advantage to you if we develop the project documents when it comes to securing financing for the project. Complete our Project Finance Request form and indicate that you have not yet prepared your project documentation.

 

Do you insist on producing the documentation for my project? 2017-06-06T15:25:34+00:00

No, we don’t insist on developing the project documents, you are free to engage third party consultants and professionals to produce your project documentation. However, the project documents must meet our standards and the generally accepted standards of international project investors and lenders. We will not accept an engagement to provide financing for projects that don’t have high-quality documentation. If your project documentation is produced by a third party with whom we are unfamiliar, we have to vet the documentation before we present the project to lenders.

 

Can Global Trade Funding create the documentation for my project? 2017-06-05T23:31:37+00:00

Yes, Global Trade Funding can create the project documentation for your project. Having us develop the project documents significantly increases the likelihood of securing approval for the project financing because we can control the quality of the documents and we can craft the documents precisely the way lenders prefer them. We have a highly experienced Project Finance team that produces comprehensive market studies, financial feasibility studies, business plans, architectural plans, environmental surveys and all of the project documentation you need. We develop the project documentation for most of the projects we approve for financing.

What documentation is needed to engage you to secure project financing? 2017-06-06T16:06:55+00:00

While each project is unique, each project must also adhere to the generally accepted guidelines of international project finance that lenders and investors expect for project finance requests. While not absolute, you should reasonably expect documentation to include:

  • a market feasibility study that includes an analysis of any competitors;
  • a financial feasibility study that is modeled on cash flow and includes detailed revenue, expenses and profit, a ten-year forecast, a risk sensitivity analysis, detailed hard and soft costs, and detailed exit year calculations;
  • a business plan with professional management structure that includes resumes and non-compete agreements;
  • a development budget that details all expenditures that will be incurred prior to the commencement of project operations including contingency provisions;
  • initial architectural plans and specs;
  • an environmental impact assessment;
  • a social impact assessment;
  • an analysis of local government acceptance and anticipated government and public objections to the project;
  • a private placement memorandum with an executive summary of all of the above addressed.
How important is the project finance documentation? 2017-06-07T12:34:30+00:00

High quality, well-written project finance documents are essential in getting your project finance loan approved upon terms which are favorable to the project and its sponsors. There are more projects seeking financing than there is available funding. Therefore, potential lenders must be convinced that your project is not only a solid investment but that it is a better investment than the other requests for financing under consideration. Your project finance documents are the primary means of communicating this. Moving beyond the financing, the project documents are also vitally important for the success of your project.

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