Pre-Submission of Proposal

• Compile all the documents in a systematic manner well before time. The important documents are company & project profile, past & future financial statements, securities papers, KYC papers. A brief PowerPoint presentation covering all aspects really helps during a personal meeting with the banker. Through  understanding of the industry sector is essential.
• Dependency on one bank reduces negotiation strength. Work with minimum of two banks at a time. A combination of Private & Public sector banks is preferred. More than two banks can help but increases the work of bank-specific documentations. You should consider your current bankers also for this.
• Well in time preparation & submission of project finance proposal is very important. This will help avoiding last minute rush when you don’t have time to negotiate. This will also help understanding the banker’s view clearly & in timely manner which helps to rework the names of proposed bankers, if required. It is important to understand the banker’s comfort on the industry sector & specific company / project. If branch/ zone of the bank has deficit in their periodic targets, the proposal can be moved faster.
• Be clear about project structure, strengths, promoters’ contribution, bank funding required, primary securities value, collateral securities value. Your expectation on cost of funds, processing fees, foreclosure charges & other important terms should be logical & clear.

Submission, Discussion & Exchange of Information on Proposal

• Present the profile during personal meeting with confidence & discuss all parameters during personal meeting on credit appraisal with banker. You need to be clear on best possibility of all the important terms so that you can exchange views rationally. All top management people shall be present during the meeting.
• Understand the banker’s perspective on the proposal, limitations if any. Try resolving the queries, if those can be resolved with logical explanation during the meeting itself. If you need some time to resolve the queries, it is better to ask for it & respond as per the timeline target. If the banker has an established cluster for the proposed project, you are likely to get a better deal due to deep understanding of the cluster’s risk by the banker.
• If you have a banking track record with the same banker, discussing that will provide more confidence to the banker. If you don’t have the banking track record with the same banker, you should be ready for queries on why you would like to change the banker. There can be some logical reasons like better terms, banking experience, consortium banking.
• Based on the size of fund requirement, you will have to consider meeting regional office, zonal office, credit team of the banker. Depending on the evolution of interaction, you can understand the feasibility of proposal & possible terms with the banker. You can discuss the forward path and tentative timeline to close the same. The forward steps can include the preparation of title clearance & valuation reports of securities, obtaining credit rating, if applicable, CIBIL records, TEV Study.
• Once, you are 80% sure about the feasibility of the proposal, you must submit all the systematically compiled documents with a nice covering letter. It is better to keep all banking correspondence in writing. Submission should be done with minimum two bankers.
• After submission, there could be further exchange of information on specific queries raised by the credit appraisal team. Be clear that you need to submit logical response supported with information to all significant queries. Until then, the proposal will not be moved forward. The speed of clearance at each stage, largely depends on the speed of response & follow ups by you at each level of authority.
• You should receive a draft sanction letter to understand the terms. Understand each term of the draft sanction letter clearly, request for change in the same, if it is not as per the discussion done so far. This is the point of time when you should decide the one banker to finally work with. While deciding so, consider both the offer on hand & banking experience with your current banker.

Sanction of Proposal

• You should receive a final sanction letter incorporating all terms discussed & agreed upon so far. You can go through the same to ensure it. After you accept the sanction, major milestones are completed. There would be further steps like hypothecation of securities, signing off the documents, pre-disbursement audit by the bank’s team. All the best!!!

Important parameters to get the best deal on project finance from bank – clear presentation of company, promoters & project strengths, own study on technical & commercial feasibility, arranging promoters’ contribution, security coverage to match the banker’s expectations, creating healthy competition between bankers, well in time preparation, banking track record, logical & timely response to banker, rational negotiation with banker.