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Project Finance FAQ2022-02-07T01:25:54-05:00

Project Finance FAQ

Our project finance FAQ offers hundreds of well organized, insightful project finance questions and answers to expand your knowledge and better prepare you for the project finance application process.

Project Finance FAQ Overview

Project Finance FAQ is an extensive library of frequently asked project finance questions and answers that features several hundred thoroughly answered project finance questions. Because project finance is the most complex financing structure in the world of international finance, Global Trade Funding furnishes this expansive Project Finance FAQ to help project sponsors and project stakeholders who are here to apply for project financing self-analyze the viability of their project and intended financing.

We also provide this material to better help you generally understand project finance.ย Ourย objective is to provide you with a project finance FAQ platform that presents answers to many of the most often asked questions about project finance features, project finance procedures and project finance documents to assist project sponsors and project stakeholders with theย project finance request.

The project finance FAQ is extensive, thorough, and exceedingly useful toย Project Sponsors, equity investors, project contractors and consultants, and project participants of every kind when used thoroughly. If you are applying for project financing please resist the urge to skim the highlights.

Becoming familiar with the answers to these project finance FAQ questions increases the likelihood that your Project Financeย Application will be approved and may also reduce potential delays in the financing process.ย Sponsors may also find the industry resources page of the International Project Finance Association helpful.

Project Finance FAQ – Frequently Asked Questions

How important is the project finance documentation?2018-04-27T09:03:37-04:00

High quality, well-written project finance documents are essential for getting your project finance loan approved. The more professional the project finance documents, the higher the likelihood of being able to negotiate loan terms which are favorable to the project, its sponsors and stakeholders.

There are far more projects seeking financing worldwide than there is available funding. Therefore, potential lenders must be convinced that your project is not only a solid investmentย but that it is a better investment than the other project finance requests being considered. Your project finance documents are the primary means of communicating this.

After the project financing is closed and the project commences, the project documents are also vitally important for the success of your project.

What documentation is needed to engage you to secure project financing?2018-12-05T10:49:49-05:00

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:

  • market feasibility study that includes an analysis of any competitors;
  • 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 estimates of hard and soft costs, and detailed exit year calculations;
  • business plan that includes a professional management structure including resumes, biographical information for all key project stakeholders and non-compete agreements;
  • 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;
  • environmental impact assessment;
  • social impact assessment;
  • analysis of local government acceptance and anticipated government and public objections to the project;
  • private placement memorandum with an executive summary of all of the above addressed.

That does not mean that all of this documentation must be complete before you engage our services. Quite the contrary. We encourage our clients to engage us early in the project lifecycle.

Can Global Trade Funding create the documentation for my project?2020-11-20T15:06:45-05:00

Yes, Global Trade Funding can create the project finance 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. Our high-performance 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.

Do you insist on producing the documentation for my project?2018-05-01T00:43:32-04:00

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.

I have not yet prepared project documentation, should I hire consultants to write it now or should I contact you first?2018-05-01T00:43:32-04:00

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 Financeย Requestย form and indicate that you have not yet prepared your project documentation.

How do you provide project finance?2018-05-01T00:43:31-04:00

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.

What mistakes are made by project sponsors who have never developed a significant project before?2018-04-27T10:57:48-04:00

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 documentationย developedย byย consultantsย with whom they are comfortable, rather thanย establishedย consultantsย withย international reputations.

Itย is naturalย to want theย documentationย toย appear as favorableย asย possible but is much more important to develop documentation that is realisticย andย upon whichย internationalย lenders and investors can rely.

Who are the members of the lending syndicate?2018-05-01T00:43:31-04:00

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.

My project documentation was prepared by an accountant, is this sufficient to secure project finance?2018-04-27T09:16:30-04:00

Probably not, unless your accountant has a great deal of experience securing international project financing. 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.

When is the syndicate formed?2018-05-01T00:43:31-04:00

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

What happens after the syndicate is formed?2018-05-01T00:43:31-04:00

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

My project documentation probably doesn’t meet your standards, will you consider approving my project for financing?2018-05-01T00:43:32-04:00

Absolutely not. It is impossible to secure a commitmentย 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 developย the project documentation.

How do the lenders know that the information in my project documentation is accurate and reliable?2018-05-01T00:43:31-04:00

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

Do you only approve projects with high quality documentation?2018-05-01T00:43:32-04:00

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.

Do the lenders require you to financially guarantee my project?2018-05-01T00:43:31-04:00

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.

What are the costs to produce project documentation?2018-05-01T00:43:32-04:00

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.

Am I required to supply the lenders with financial guarantees?2018-05-01T00:43:31-04:00

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

How is the data for the financial feasibility study derived?2018-04-27T11:02:18-04:00
The financial feasibility study is absolutely critical to the approval of project finance loans. 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 which are based on unsupported assumptions rather than factual data from comparable projects carry no weight with project lenders or international investors. To qualify for project financing and secure project loan approval, we must present your project to lenders based on realistic revenue, expense, profit and cash flow projections and must be able to demonstrate an acceptable internal rate of return.
Do you guarantee providing me with the required project financing?2018-05-01T00:43:31-04:00

No. Every project has an element of risk.

What is the likelihood of you providing me with the required project financing?2018-05-01T00:43:31-04:00

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.

Should I have a material disclosure statement in my project documentation?2018-05-01T00:43:32-04:00

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 giveย potential investors confidence in the financial data used in the core project studies, and in the independence and objectivity of the studies.

How long does it take to finance a project?2018-04-28T01:45:07-04:00

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.

My project is viable but my resume lacks management and operational experience. Can you help me?2018-05-01T00:43:32-04:00

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.

Do you act on my behalf or on the investors’ behalf during the project financing process?2018-04-28T01:47:55-04:00

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

Can the deal proceed while the project documentation is being prepared?2018-05-01T00:43:32-04:00

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

Why do you maintain independence from me and the investors during the project financing process?2018-04-28T01:49:41-04:00

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.

When do you receive your project finance provision success fee from me?2018-04-28T02:21:21-04:00

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

Do you accept finance provision fees from me before finance is placed with my project?2018-04-28T02:39:47-04:00

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

Do you contribute to project development costs?2018-04-28T02:41:04-04:00

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

Are you interested in entering a joint venture at the start of a project?2018-04-28T02:43:13-04:00

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

How long does it take to secure project finance approval?2020-05-17T15:03:42-04:00
It is impossible to determine with any degree of certainty, how long it will take to secure project loan approval. The reality is that the time to approve project funding depends, in large part, on a combination of these variables and others.
  1. The overall quality of the project.
  2. Amount of funding requested.
  3. Amount of sponsor and stakeholder equity invested.
  4. The nature and complexity of the project.
  5. Track record of the project sponsor
  6. Location of the proposed project.
  7. Risk factors.
Will you invest financially in my project?2019-06-27T10:24:39-04:00

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

When does due diligence occur?2022-02-07T11:32:36-05:00

Before we submit a project finance loan request or document package to one of our financial partners, we perform a preliminary due diligence investigation. It’s not the comprehensive due diligence that will be required if the deal continues forward, the preliminary due diligence investigation is intended to uncover any sponsor or project deficiencies that would hinder the closing of the project financing.

We will verify the sponsor’s reputation, financial strength, and relevant experience. We will verify the quality and sufficiency of the project documents (at least those that have been prepared to date), and we will analyze the project and property at about the same time as our site visit. Our Preliminary Due Diligence Report will be completed after the site visit and provided to the lenders with the loan application and project finance documents.

Review Project Finance Due Diligence for additional information.

What does due diligence entail?2022-02-07T01:24:36-05:00
We perform enhanced due diligence on all project stakeholders with an emphasis on project sponsors. The due diligence investigations are mandatory and project finance underwriting cannot be completed until all of the due diligence has been implemented. We have a form for project sponsors which is furnished at the start of underwriting. Due diligence investigations are performed by a third party service with whom we have anย agreement for discounted investigative fees and youย are only responsible for the actual fee.
How long does it take to get project financing approved and closed?2020-05-17T16:53:37-04:00

Project financings are large, complex transactions involving countless variables, most of which require action by the project sponsor. Thus, the timeline to approve and fund a Project Financing is impossible to determine in advance and is entirely dependent on where you are in the timeline when you bring it to us and request financing.

Project Finance Procedures provide a step-by-step explanation of the Project Finance process.

What is the due diligence process in a project financing?2022-02-07T11:49:54-05:00

Before we submit a project finance loan request or documents to our financial partners, we perform a preliminary due diligence investigation. While not the final, comprehensive due diligence that will be required if the deal continues forward, the preliminary due diligence investigation is intended to uncover any sponsor or project deficiencies that would hinder the closing of the project financing.

We will verify the Sponsor’s reputation, financial strength, and relevant experience. We will verify the quality and sufficiency of the project documents (at least those that have been prepared to date), and we will analyze the project and property in tandem with our site visit. Our Preliminary Due Diligence Report will be prepared after the site visit and provided to the lenders.

Review Project Finance Due Diligence for additional information.

What types of projects are you interested in financing and developing?2018-05-01T00:43:32-04:00

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.

What factors do you consider when evaluating a project for financing?2018-05-01T00:43:32-04:00

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.

Do you finance projects which do not have a significant construction component?2018-05-01T00:43:32-04:00

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

Who pays due diligence costs in a project financing?2024-04-15T04:15:05-04:00

We separate the due diligence functions in project finance into two distinct packages. The preliminary due diligence investigation, which is the more affordable of the two segments, is performed more or less coincidentally with the site visit to see your project. The final, comprehensive due diligence package, which is the more expensive of the two, is performed only after your project has received preliminary approval.

The borrower pays for both investigations. The borrower also pays for the cost of the site visit for two of our senior managing partners, and one senior staff person, along with all related expenses.

Review Project Finance Due Diligence for additional information.

In which countries will you provide project finance?2019-06-27T09:51:35-04:00

We provide project financing in 149 of the 195 countries worldwide. So while not every country in the world, we offer project funding in roughly 72% of the world, and attempt to keep the list of eligible countries as broad as possible. The list of eligible countries changes from time to time due to global events, so those applying for project financing must verify that their project is located in an eligible country.

Go to Approved Countries for Project Financing and verify eligibility before submitting a Request for Financing.

Do you offer project financing everywhere or only in certain countries?2020-05-07T11:58:36-04:00
While we don’t provide project financing in all 195 countries in the world, at present, we offer major international project financing in the 149 countries listed as approved for Project Financing. The list of eligible countries is constantly changing due toย periodic changes in political and economic conditions in emerging markets throughout the world. We endeavor to keep the list of eligible countries as broad as possible to serve our clients wherever they need us. At present, our list of countries eligible for project finance loans includes 149 of the 195 countries in the world. Because the list of eligible countries changes from time to time, sponsors seeking project financing must verify that the country in which their project is located is listed as an eligible country. Go to Approved Countries for Project Financing to confirm eligibility before submitting a Request for Financing.
What is the minimum amount of project financing you offer?2019-06-26T19:25:28-04:00
Project finance is complex financing that requires a great deal of time, expertise and expense, so our project funding minimum is $20,000,000 US.
Do you provide project financing for projects with no equity?2019-06-27T10:24:39-04:00

No, we don’t provide project financing if the project sponsor has no equity invested in the project, and neither does anyone else. A research study of project financings worldwide found that, on average, project financings that are approved and closed have 63% debt and 37% equity. Some deals get done with as little as 20% or even 10% equity, but not many.

Deals with no equity are entirely too speculative and no project finance providers offer 100% financing. Project finance lenders, project finance arrangers and project finance providers are not in the business of speculating. In fact, the core discipline of project financing is risk mitigation.

Additionally, the demand for project funding is enormous. We get more than twenty project finance applications for every one that closes, and the one that closes usually has higher than average borrower equity. Officially we will look at deals with as little as 10% equity, but we’ve only closed one in the last 10 years.

โ€บ Minimum required equity 10%
โ€บ Closed deals average 37% equity

Do you provide project financing for projects where construction has already started?2019-01-19T21:12:04-05:00

Project financing is never provided for projects with construction that has already commenced because there is simply no easy or foolproof way to secure the collateral.

Do you provide project financing for land acquisition projects?2019-01-19T20:41:30-05:00

No. We do not provide financing for projects that are limited to the purchase of land. This is not project finance, it is speculation.

What are EPC Contracts in project finance?2022-06-26T02:48:44-04:00

Engineering, procurement, and construction contracts, which are known simply asย  EPC Contracts, are a form of turnkey construction contracts that are universally accepted by project finance lenders. In fact, EPC Contracts have emerged as the construction contract of choice in project financings that involve major international development projects.

Are EPC Contracts the same as turnkey construction contracts?2022-03-13T11:47:36-04:00

EPC Contracts are fixed-price, turnkey construction contracts, but they are also much more. EPC Contracts establish a contract between the project company and an EPC construction company to provide all of the engineering, procurement and construction services needed to build the project.

Do you provide project financing to acquire existing projects?2019-01-19T20:42:20-05:00

Yes. While the vast majority of project financings we provide finance traditional development, utility, infrastructure and public private partnership projects, we are willing to look at acquisitions of projects which are already operating.

Do you provide project financing to refinance existing projects?2019-01-19T20:42:06-05:00

Yes. Although it is exceedingly rare, we will look at refinancing existing projects under the right circumstances.

Do you provide bridge finance?2018-05-01T00:43:31-04:00

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

Is the borrower required to have equity in the deal?2019-06-30T15:10:56-04:00

Yes. We require actual cash equity in the deal. All project finance lenders, project finance arrangers and project finance providers require the borrower to have equity in the deal. We have never funded a project financing with less than 10% equity, and then only once in the last decade. The average project financing last year closed with 63% debt and 37% sponsor equity.

Project finance is not speculation. It was developed more than 700 years ago as a method of financing that is specifically intended to mitigate or eliminate risk. In fact, almost every element and procedure in project finance are for risk mitigation. For every project finance transaction closed there are more than 20 applications because project finance lenders are extremely careful about taking risk. Deals with no equity don’t get funded and deals with very little equity stand very little chance. For additional information see

Project Finance Learning Center

Project finance was first used in 1299 when an Italian merchant bank provided the project financing to finance the development of English silver mines. England repaid the Italian merchant bank who funded the project with the output from the mines. Project financing has been used to finance thousands of projects since those silver mines, including such notable projects as the Panama Canal and North Sea oil platforms. Our Project Finance Learning Center includes information we hope will improve understanding of this type of finance.

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