In general, a lead bank or underwriter of the loan, known as the ‘arranger,’ is in charge of structuring the loan arrangement. This lender may contribute a larger amount of the loan or execute activities such as distributing cash flows among syndicate members and doing administrative responsibilities. Companies often face the challenge of finding funds to finance large projects, especially when it comes to multi-billion dollar infrastructure, industrial or energy projects with a long construction period. The most preferable options remains the so-called syndicated loan financing
At the planning stage of your projects, our clients must decide whether to use equity capital, finance a project with the help of business partners, shareholders, investors, or use loans from banks and other financial institutions.
Looking to invest, fund your venture, or get advice on wealth preservation? syndicated loans financing remains your best bet.
If you are planning to implement a large investment project, contact Viola Funding Limited for advice.
With the support of leading and high-net-worth angel investor’s, we can help you finance mining projects, wind farms, waste recycling plant or other capital-intensive facility on the most favorable terms and affordable interest rate annually.
Other types of external financing and Syndicated loans
All external financing instruments have different purposes and usually mean different costs for the companies that use them.
Today a business can choose the following sources of project financing:
Leasing.
Factoring.
Issue of shares and bonds.
Bank loans, etc
According to the World Bank, financing large projects is a major challenge for fast growing economies. All of the above sources of project financing can be used in various combinations, based on the characteristics of a particular business.
Main sources of external financing of projects.
Factoring: This financial instrument is recommended for companies experiencing temporary problems with maintaining financial liquidity. This is an early redemption of all payable bills by the bank with which the company has signed an agreement on mutually beneficial terms
Leasing: It is a way of financing the purchase of a certain object, but not a source of funds for the current activities of the company. The advantage of leasing is that it is much easier to access than a loan. This instrument refers to a leased item (machines, devices or vehicles).
Bank loan: Loans can be provided by both banks and other institutions. Their disadvantages are usually short maturities and high interest rates.
Despite the existing possibilities of obtaining funding from various sources, loans should be the basis of external financing for projects.
Any major project requires a significant flow of funds, which must flow on a clear schedule to ensure the continuous operation of numerous contractors and subcontractors, manufacturers and equipment suppliers. Depending on the schedule, companies can use different sources of funds at certain stages of construction or operation of the facility.
Due to the variety of forms of lending, this tool can be easily adapted to the individual needs of a particular company. It is also one of the cheapest sources of capital.
The role of a financial advisor in obtaining a syndicated loans
Company managers need to understand that preparation determines the subsequent success of the entire operation. it is imperative to note, that the adaptation of your company would demand for financial market, completes the term and process.
When your company first enters the syndicated finance markets with a major project, it is advisable to hire a financial advisor from the start. such as Merryll Lynch, Goldman Sachs, JP Morgan, Citibank, Deutsche Bank, RBS, West LB and many other world famous brands.
Viola Funding Limited is ready to provide businesses with a full range of advisory services, including financial modeling, selection of optimal funding sources and assistance in obtaining a syndicated loan on favorable terms.
The consultant’s fee depends on the loan amount. For the largest loans of about 1 billion euros, this fee can amount to hundreds of thousands of euros. The advisor’s excellent knowledge of the financial market (both domestic and international) will be an advantage for the borrowing company.
The role of a financial advisor in obtaining a syndicated loan:
• Professional assistance in drawing up a business plan at the request of the bank. Execution of official documentation and negotiations with interested parties.
• Conducting a detailed analysis of the financial market. Choosing the most appropriate moment to enter the market to obtain a loan on the best terms.
• Professional assistance in drawing up a business plan at the request of the bank. Execution of official documentation and negotiations with interested parties.
Only companies that have experience in syndicated financing or are part of an international group using such financing can enter the market without the assistance of a financial advisor.
In addition, you can hire a financial advisor from companies that are professionally engaged in such activities, such as Deloitte & Touche, Ernst & Young
Stages of obtaining a syndicated loan for a large project
At this stage, a professional financial consultant helps to clearly divide the organizational process into several stages with deadlines for their implementation.
Preparing documents and arranging syndicated financing usually takes more time than applying for a loan from one bank.
A simple contract with standard market terms can take up to 3 months to prepare, while more complex options can take 6 months or more.
In general, the stages of obtaining a syndicated loan include:
• Hiring a financial advisor (optional).
• Selection of proposals, selection of the organizing bank for the consortium and signing of a mandate letter (a document authorizing this bank to organize a syndicate on agreed terms).
Syndicated loan standard terms and conditions
Particular attention should be paid to the events of default prescribed in the agreement, which can jeopardize the position of the lender or borrower. In general, in the case of obtaining a syndicated loan, the borrower has to provide a little more information than a regular loan.
Financing large projects through a syndicated loan requires the borrowing company to strictly comply with numerous requirements throughout the term of the agreement.
Disclosure obligations are limited to standard reports such as quarterly and annual reports, often requiring audits. You may need to provide much more detailed reports.
In addition to standard reporting on project finance, banks may require permission to change a company’s business profile, an obligation to apply for consent (waiver) in the event of a merger with another legal entity, the creation of subsidiaries, and many others.
Bank requirements depend on many factors, including the following:
The size and position of the company in the market.
The amount of the syndicated loan and its maturity.
History of cooperation with agent bank.
Further responsibilities of the borrowing company should include maintaining certain financial ratios within specified limits.
The most common indicators in loan agreements include:
• EBITDA / debt service. This figure should be high. An indicator below 1.5 is considered dangerous, and at a lower level, companies have problems servicing their current debt.
• Debt / EBITDA ratio.
• Debt / equity.
Important recommendations for syndicated loan financing
The syndicated loan provides stable financing at relatively low costs. Preparation in this case is extremely important, since the subsequent success of the entire operation often depends on professional planning and competent paperwork.
When using syndicated financing, companies should maintain certain ratios within specified limits. These actions are in the best interests of the business as it will minimize subsequent costs.
If you are looking for funding sources for a large project, contact Viola Funding Limited
We are ready to share our experience and assist in obtaining loans from leading European banks and financial institutions.
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