Financing of large projects: investment credits for companies (2023)

Do you have an approved project?

Are you looking for financing with favorable terms?

We professionally assist our clients in obtaining project financing from leading Spanish banks and investment funds, including loans for the implementation of large projects.

Our partners include the largest Spanish banks such asSantander,BBVA,Caixa Bankand a number of other reputable financial institutions.

We approach the choice of financing source and financing terms separately for each investment project, which facilitates the receipt of funds on the most favorable terms for our client.

Top 10 Spanish banks in 2020:

The biggest problems with getting a business loan:

•Lack of adequate security.One of the most common reasons why a bank refuses to finance a project is a lack of collateral or suitable project participants. This often comes with high credit risk. We have an individual solution for each customer.

•Many banks with different criteria.Lack of experience and in-depth knowledge of how each individual bank works, as well as the complexity of approving a business loan or bridging finance, is the second most common reason for refusal.

Our companyparticipates in the financing of large international projects in the fields of energy and transport,waste treatment, industrial production, mining and mineral processing and other industries.

We offer:

• Profitable financing models.
• Preparation of a feasibility study.
• Design and build from scratch.
• Operation, maintenance and repair.
• Project management, etc.

For more than 30 years, we have worked actively with private and public companies in Europe, Asia, Africa and Latin America.

Discover the benefits of working with us:

• Three decades of practical experience.
• Active presence in many countries.
• Investment projects worth several billion euros carried out.
• Combination of the best financial instruments based on our own expertise.
• Cooperation with leading commercial banks in Spain.

We always follow an individual approach to each individual customer.

Since each project is unique, we have developed our own algorithm, which guarantees the creation of optimal conditions for obtaining a business loan, regardless of the degree of credit risk and collateral.

We speak the same language as you and your bank.

Cooperation on the financing of major projects consists of the following phases:

•Analysis of your investment plan.This is the first stage where we look at your contract with a financing organization, the current situation depending on whether it is a company with a long history or a newly established project company. We currently have an overview of the situation.

•Development of financial strategy.In the second phase, our experts negotiate with partner banks about specific requirements for the applicant and the project. We develop flexible financing arrangements in the absence of sufficient security and present you with a clear plan to obtain a business loan.

•Sign a contract and provide services.This part of the work is related to the separation of advances, intermediate and final payments (depending on the chosen strategy), the issue of the project and any change to the terms of the contract.

Want more information on investment banking project finance services? Contact our experts at any time.

Large project financing

Project financing is a unique financing technique used by many well-known business projects.

This method is a complex combination of economic, legal and organizational principles used to finance large projects in the extractive industry, pipeline construction and oil refineries, energy plants, waste treatment plants and other facilities.

Project finance is increasingly becoming the preferred alternative to traditional financing methods for infrastructure and other major projects around the world.

Project financing involves the investment of funds necessary to complete an investment project from scratch. These resources can be generated from various sources, including the company's own resources (depreciation, retained earnings) and borrowed resources (venture capital funds, bank loans) as well as assistance from international organizations and the state budget.

A common form is the so-called co-financing, which takes the form of a partnership between two or more institutions to provide financial support for the implementation of an investment project.

Usually, a project investor is a company that implements it. However, in the second half of the last century, the use of a wider range of sources, including investment banking, to finance projects seemed to be a consistent trend in industrialized countries.

Financial support from the state is often provided in the form of state guarantees for taking out loans, tax benefits, etc. More rarely, entrepreneurs can rely on direct funding from the state budget.

The financing of large investment projects is usually carried out by large financial associations (permanent or specially established for the implementation of a specific project - consortium), as well as international financial organizations.

Project financing is different from traditional lending. This type of financing is provided not only by commercial banks, but also by investment banks, investment funds, pension funds, as well as specialized funds from international and regional organizations, leasing companies, etc.

Investment loans for companies in Europe

A loan from a bank is one of the most common forms of financing for a business.

But we are currently seeing the following trend:well-known companies with a credit history can more easily access investment banking for project financing than new companies.

A positive point in the case of taking a business loan is that your company retains more independence in managing the project and the funds received.

There are also disadvantages.

As we have already mentioned, getting a loan to finance a start-up business is a difficult task. It is very problematic to find a bank that is ready to offer new companies favorable terms and low interest rates.

Business loans as a source of financing for the implementation of investment projects are granted under carefully defined conditions.

From the commercial bank's point of view, a loan to finance an investment project is risky. This is why banks usually charge higher interest rates and risk premiums.

Banks only take this risk with reliable guarantees of project efficiency and adequate security. In many cases, banks act as entrepreneurs and actively intervene in the development and implementation of the project, even managing a facility that is already in operation.

In the loan agreement for the construction of a specific investment object, some commercial banks reserve the right to convert part of the loan into shares in the company managing the project.

This makes project financing one of the levers for raising industrial and banking capital.

The reality is that today it is quite difficult to get business investment loans with optimal terms. Here, it is extremely important to have a reliable business partner who is willing to provide a loan guarantee.

The main sources of project funding

Questions companies seek answers to when looking for funding sources:

• How much money is needed to complete an investment project?
• What funding sources for major projects are available to companies?
• What are the costs of different funding sources?
• What is the weighted average cost of capital for a new business?
• What is the structure of the funding sources for an investment project?
• When might a company need borrowed money?

The successful financing of your project and the security of your investment will ultimately depend on the correct answer to each of these questions.

Funding sources are divided into internal and external:

•Hold:retained earnings, depreciation, disposals (refusal to invest in other projects).
•abroad:equity (issuance of ordinary and preference shares), debt (bonds and mortgage loans, short-term debt), as well as financing through leasing.

As a rule, a company uses different sources of financing for its investment projects.

Funding from each source has its own costs.

The company must find a financing structure where the costs of raising and using capital are minimal and the risk can be considered acceptable.

Internal funding sources

Project financing can be done at the expense of retained earnings. Retained earnings are the portion of net income that remains after all obligations have been met, including the payment of dividends.

This income can be used in two ways:

• Reinvestment in the company.
• Distribution of capital among shareholders.

Amortization financing is also possible. The company's depreciation fund is intended for the restoration of worn-out fixed assets.

These resources are also used to finance projects.

Possibilities for using depreciation funds:

• The amount of cash income from depreciation is generally greater than that required to replace the fixed assets at a given time (the income is always the same at the beginning or even higher if a regressive system is used).
• Depreciation and retained earnings are practically undifferentiated and, despite their different origins, are used together to finance the company's investment plans.
• Replacement of certain assets is deferred beyond the depreciation period.

Another source of internal financing is divestment, which involves selling the company's real estate, removing inventory, and quick collection.

External sources of funding

Currently, external sources of finance are the most important source of finance for business development.

These funds are formed from various sources.

First is equity (issuance of common stock). An ordinary share provides beneficial ownership of a portion of the public company's assets.

This has the following consequences for owners of ordinary shares:

• Receipt of a dividend, the amount of which is not predetermined.
• Acquisition of a share in the real estate in the event of liquidation of the company.
• Right to distribute the company's saved profits.
• Right to monitor the company's activities.
• Equity liability in the event of bankruptcy.

These shareholders are last in line for compensation and risk losing invested capital if bond and preference share holders and banks receive all assets as compensation.

The next possible source is the issue of preference shares.

The characteristics of preference shares are as follows:

• Holders of these shares are entitled to a pre-agreed dividend.
• In terms of receiving dividends and paying out the remaining capital on liquidation, they have an advantage over owners of ordinary shares, but are inferior to holders of bonds and other debt obligations.

It is also possible to raise funds by issuing bonds.

Bonds are securities issued by a company to a lender as part of a long-term loan.

As a debt instrument, bonds have a specific face value. They are issued for a fixed period and the interest paid depends on the interest rate set.

At the end of the period, the bonds are redeemed, that is, the amount corresponding to the face value is paid to the creditors.

In the event that compensation is received in connection with liquidation and other reasons, bondholders have the highest priority (along with banks that have issued business loans).

Project financing investment bank can be carried out by providing business loans:

• Bank loans for investment purposes are granted for a fixed period (usually 3 to 10 years).
• Loans are repaid with interest in regular periodic payments (six months annually).
• Sometimes the repayment of bank loans starts after a grace period.

In addition to local and foreign banks, loans can be obtained on similar terms from other financial institutions, venture capital companies and specialized government wealth funds etc.

For some large projects, leasing is one of the alternative sources of project financing. The use of financial leasing includes the formation of cash flows based on the price of new equipment, agreed rental payments, losses by not utilizing tax benefits from depreciation, and more.

Venture funding is typically aimed at fast-growing start-ups with an expected high market value as well as established companies.

Features include:

• Given the high risk and active role in planning, management and marketing, the venture firm expects a high return on investment.
• Financing takes place over a longer period (on average 5-6 years) and usually takes place through the acquisition of real estate through equity or loans, but with the relevant reservations in the share purchase agreement.

The profit in a joint venture company takes the form of an increase in the invested capital when the company goes public or when a merger or acquisition takes place.

Venture capital funds invest in acquiring company shares.

They take a significant risk – similar to the risk the entrepreneur takes, and therefore expect a high return.

Thanks to this resource, entrepreneurs have the opportunity to start and develop a new business or an innovative idea. They can rely on expert help to run a new business, as well as benefit from contacts with investors. In return, the investor gets a high return on his investment.

Financing of innovative projects in and outside Europe

Investments are one of the most important factors for successful economic activity, improving quality and reducing costs, improving competitiveness, attracting new customers, etc.

Investments are the use of funds in a certain type of activity for a certain period of time, during which the owner of the funds will receive an income that exceeds the initial amount of the investment.

Such an understanding of the nature of investment is limited in terms of innovation.

The traditional criteria for choosing an investment project, which are mainly of an economic nature, are not sufficient.

Investment in innovation is money spent on developing and/or adapting an innovative, high-tech and/or scientific product.

Investment is the targeted use of funds that leads to the implementation of the company's development strategy. Investments at the corporate level are closely linked to planning documents and strategic decisions.

In practice, however, only a few companies in developing countries link investments to long-term strategic priorities. In most cases, investments are focused on narrow financial indicators, which are not necessarily related to strategic perspectives or even to achieving regular improvements in non-financial indicators such as quality, customer satisfaction, image, etc.

Despite the increasing importance of non-financial indicators when choosing an investment project, many commercial organizations continue to allocate resources through routine decisions focused on short-term financial parameters in the form of cash flows.

These organizations do not include long-term financing options in their asset allocations. This requires the creation of a mechanism to integrate strategic planning into the resource allocation process. The rationalization of strategic investments requires a financial and non-financial assessment of each potential investment.

Investing in innovation is a complex process with high risk.

The investment decision involves the selection of mutually exclusive or competing alternatives for the most efficient investment of resources with an acceptable level of risk.

Funding for major innovative projects typically includes the following:

• Analysis of the current situation.
• Anticipate and evaluate potential business opportunities.
• Anticipate possible future changes in the business environment.
• Estimate the cost of resources: financial, personal, informational and organizational.
• Evaluation of future results in quantitative and qualitative terms.

Innovation is rarely associated with increased productivity and lower costs in the short term.

This is the biggest difficulty in finding funds.

Another key feature of investment in innovation is the need to manage and control costs throughout the product life cycle.

Capacities, information support and technology, but also organizational structure and ecosystem are the most important factors to increase the effectiveness of innovative processes.

Naturally, resources have a price, but quantitative parameters are not always the most important when implementing an innovative project. Quality indicators often have to be prioritized for resource evaluation.

Human resources, considered an investment in innovation, include the presence of highly qualified specialists in all necessary areas, as well as the ability to work effectively on various projects in growing teams.

IT and information as an investment in innovation presupposes the availability of hardware and software, up-to-date and reliable interdisciplinary information.

Organizational capital as an investment in the company's innovative activities includes teamwork, culture and the spirit of the company.

Due to the lack of necessary investment opportunities for innovation, many Eastern European companies and companies in developing countries face a limitation of innovative growth.

We are ready to help you find sources of financing for your business, including obtaining investment loans for large projects from Spanish banks.

Our investment banking services for project finance

In addition to the standard set of financial instruments, we help our clients obtain loans from leading Spanish banks for major infrastructure, energy and environmental facilities around the world.

Applicants can be start-ups as well as existing companies with a long credit history.

Depending on the size of a particular project, we can arrange joint venture or external co-financing with other financial institutions, including through the use of European investment mechanisms.

An important element in the evaluation of potential investment projects is the ability to generate sufficient cash flows to support the financing provided and the normal operation of the project.

The conditions for this type of financing are formulated in accordance with the particular circumstances of the individual project.

For initial consideration of major projects, customers must provide the following documentation:

• A detailed business plan containing a detailed financial model for the project.
• Official documentation of the borrower's legal, fiscal and financial status.
• All necessary permits, licenses, contracts and other relevant documents related to the construction and operation of the facility.

For more information on getting a business loan for major investment projects,Contact us.