PROJECT FINANCING

&
NON-MONETARY
ASPECTS
 INTRODUCTION

Finance is one of the basic requirements of a project

which enterpreneur needs to start with in every stage of
the project. Project finance is both for short-term and
long-term. The sources from which the enterpreneurs can
meet their financial needs for their projects are internal
sources and external sources.
 WHAT IS PROJECT FINANCING

 In project financing, the project, its assets, contracts,

inherent economics and cashflows are seperated from their
promoters and sponsors in order to permit credit appraisal and
loan to the project, independent of the sponsors.

 The assets of the specific project serve as the collateral for

the loan, and all loan repayments are made out of the
cashflows of the project.
 DEFINITION

“PROJECT FINANCING may be defined as that scheme of

financing of a particular economic unit in which a lender is
satisfied in looking at the cashflows and the earnings of that
economic unit as a source of funds, from which a loan can be
repaid and to the assets of economic unit as a collateral for the
loan.”

I.M.Pandey
 CHARACTERISTIC

 Project is a distinct legal entity.

 Project assets, project-related contracts, and project cash
flows are separated to a large degree from the sponsors.
 Sponsors provide limited or no recourse to cash flow from
other assets.
 Lenders may have recourse to their funds through other
stakeholders through various types of security arrangements.
 Two-phase financing is common.
 The Basic Elements of a Project
Financing
Lenders
Loan Debt
funds repayment
Raw Purchase
materials contract(s)
Assets comprising the project
Suppliers Purchasers

Supply Output
contract(s)
Equity Returns to Cash deficiency
funds investors agreement and other
Equity forms of credit
support
investors
 FINANCIAL ANALYSIS

 COST OF PROJECT

 Land and site development

 Buildings and civil works
 Plant & Machinery
 Technical know how and engineering fees
 Miscellaneous fixed assets
 Preliminary and pre operative expenses
 Provision for contingencies and escalations.
 Working capital margin
 MEANS OF FINANCING
 Share capital
 Term loans
 Debenture capital
 Deferred credit
 Incentive sources
 Miscellaneous sources
 Retained earnings
 COST OF PRODUCTION
 Materials cost
 Utilities cost
 Labour cost
 Factory overhead costs

 CASH FLOW ESTIMATES

 PROFORMA BALANCE-SHEET
 NON-MONETARY ASPECTS

 TECHNICAL
 Location and site
 Capacity of the project/scale
 Technology
 Plant layout
 Availability of raw materials
 Physical and social infrastructure
ECONOMIC ASPECTS
Increased
output
Improved
Enhanced
Income
services
distribution

Increased Economic Increased

National
income aspects employment

Higher
Standard Larger govt.
Of revenues
living Higher
earnings
ORGANISATIONAL ASPECTS

Organisational
Aspects

Structure Recruitment Training

 Managerial Aspects

“If the management is incompetent, even a good project

may fail.”
CONCLUSION
PREPARED BY :-

 Bajaj Tanjyot
 Bajaj Tarandeep
 Gudhka Charmi
 Jankharia Aarti

GUIDED BY:-
Prof. Mrs. Khushboo Malde
BIBILIOGRAPHY

 Vasant Desai
 I.M. Pandey
 Prasanna Chandra
THANK YOU