Bank lending for investment projects. Lending for investment projects

Important in the development of lending is the widespread introduction of project financing into Russian practice. It represents the attraction of long-term investment resources for large projects using financial engineering technology. The features of this method are that it is based on a loan against cash flow generated only by a specific project, depends on a detailed assessment of the project, operational risks, income risks, their distribution between investors, lenders and other participants on the basis of contractual agreements 1, and financial ensuring the investment process is targeted and long-term.

In the economic literature, there are several points of view and approaches to assessing the economic content and functions of project financing, the definition of the concept itself, often identified with project lending, venture financing, investment lending or investment project financing. In fact, project financing differs significantly from traditional methods of financing investment projects and has its own specifics.

P. Nevitt in his work “Project Financing” considers it as “financing of a separate business unit, in which the lender is ready at the initial stage to consider the financial flows and income of this business unit as a source of formation of funds from which the loan will be repaid, and the assets of this business unit.” units as additional collateral for the loan." The emphasis in this definition is on economic isolation and a new cash flow pattern, which distinguishes project financing from other mechanisms for accumulating investment resources.

A generalization of the experience of foreign countries indicates that project financing is interpreted in two ways. On the one hand, it is considered as targeted lending to the borrower for the implementation of an investment project without recourse (turnover) or with limited recourse of the loan to the borrower. The borrower's payment obligations are secured by cash income generated by the object of investment activity (as well as assets related to the investment project). On the other hand, project financing is considered as a way to mobilize different sources and integrated use of different financing methods, as well as optimal distribution of financial risks. In a certain sense, project financing is one of the types of structured financing and reflects an organizational and technological approach, which differs significantly from the product approach, where project financing is considered as a comprehensive banking service.

Implementing this approach, I.I. Popkov defines project financing as a comprehensive banking product provided for the implementation of a separate investment project and based on a combination of lending and equity financing services.

Project financing has a distinctive feature. Traditional financing mechanisms, as is known, assume that if a company attracts financing for the implementation of a specific project, then the party providing such financing (including in the form of a loan) finances not the project, but the company implementing this project. In this case, all assets of the company act as collateral for financing. The mechanism of project financing involves financing a separate investment project, and the source of funds for returning the received investment resources is the free cash flow generated by the project. Thus, an important (but not the only) difference between project financing and project lending, investment financing and project financing is that only assets acquired for the implementation of a new investment project (IP) act as collateral. With conventional lending, funds are received by the project organizer, who simultaneously acts as a borrower and implements the project. Project financing involves the creation of a specialized company to implement the project, which is the borrower and organizer of the project.

An organizational approach to project financing involves consideration of not only objects, but also entities, which include project participants performing individual functions and taking on a certain share of risk, as well as the structure (scheme) of project financing, the system of agreements (contracts), management models and control. The subjects of project implementation are the initiator or sponsor of the project. As a rule, these roles are played by:

• enterprises interested in attracting additional investments to develop their own assets;
• companies interested in implementing the project;
• an engineering and construction firm engaged for design and construction;
• supplier of equipment;
• operating organization - to manage the project after its completion;
• internal suppliers;
• external buyers;
• an independent engineer (involved to provide a conclusion assessing the technical readiness for the start of the project, the reality of the timing and cost of construction, the feasibility and operating conditions of the project);
• insurance consultant;
• legal advisor;
• a marketing consultant (may be brought in to assess the reliability of the project's performance, especially if there are no firm contracts for the sale of products produced as a result of the project);
• financial advisor (provides the most favorable financial, credit and settlement conditions);
• creditors, etc.

Among the investors, it is necessary to distinguish strategic ones, focused on project management and long-term business growth, and portfolio ones, aimed at diversifying their investments and selling their own share at a certain stage. As a rule, investment funds and banks act as portfolio investors.

Depending on the nature of the investment project, the proportions between equity capital and borrowed funds, which are considered as off-balance sheet obligations of the project initiators, may change. If shareholders are interested in reducing the share of their capital, which has a higher minimum rate of return on invested capital compared to borrowed funds, then creditors are interested in this share being larger. The project company receives the funds needed to implement the investment project from commercial banks or other financial institutions. In this case, tools for attracting missing financial resources can be:

• bank loans, which for a long time were the main source of borrowed capital;
• bonds, the role of which has increased in connection with the implementation of infrastructure projects.

Currently, in economically developed countries, many instruments are used, among which, along with bank lending and the placement of bonds, the issue of shares, the issue of bills and other instruments, as well as their combinations, are used. The participation of international financial institutions or government agencies allows minimizing country and political risks. The project financing mechanism involves taking into account the interests of all parties involved, and the expected profit should compensate for the costs and risks of project participants.

Overcoming the consequences of the global financial crisis involves diversifying the Russian economy, modernizing its infrastructure, technological updating of the production apparatus, and introducing innovations, which is impossible without large-scale attraction of investments from various sources on the principles of project financing. The active implementation of effective investment projects in the Concept of long-term socio-economic development of the Russian Federation until 2020 is considered one of the main priorities. In accordance with the long-term development targets of our country, a fourfold increase in investment (compared to the level achieved in 2007) should ensure overall GDP growth by 2.3 times, and real income of the population by 2.6 times. By 2020, the contribution of the banking sector to investment financing should increase by 2.6 times and amount to 25% of GDP compared to 9.4% in 2007.

The potential that Russian banks have today, unfortunately, does not meet such large-scale tasks. Suffice it to say that, in accordance with the general scheme for the placement of electric power facilities in the Russian Federation, the need for investment in this industry alone by the end of 2020 is estimated by the Government of the Russian Federation at 20.7 trillion rubles, which is comparable to the amount of resources that all Russian commercial banks had at their disposal in end of 2008 (RUB 28.0 trillion).

Each individual bank has even more modest capabilities compared to the overall investment needs of economic entities. Thus, the largest operator in the investment lending market - Vnesheconombank, which manages the flow of investments on the basis of public-private partnerships, plans to make direct investments (in the form of long-term loans to enterprises) in the amount of 850 billion rubles by 2012, in the form of investments in the authorized capital of enterprises implementing investment projects - 120 billion rubles, in the form of guarantees - 100 billion rubles.

The development of bank project financing in our country has a fairly high potential in the post-crisis period, since there is currently a pent-up demand for investments in various sectors of the economy, including the implementation of large infrastructure projects.

In recent years, there has been a growing trend in the use of project financing in the world. During the period 1987-2001. The volume of the international project finance market has grown from $10 billion. per year up to 220 billion dollars. In 2008, this figure reached $250.63 billion. Dynamics of the project finance market in the period 2004-2008. characterized by the following indicators:

• a total of 2,828 loans were issued as part of project financing;
• the total volume of project financing loans amounted to $908,272.3 million;
• the average annual growth rate of funding volumes was 121.2%.

Despite the stable growth in the volume of project financing in the world in recent years, the global financial crisis of 2008-2009. made some adjustments. In 2009, there was a significant decline in lending volumes under project finance. Compared to the previous year, volumes decreased by more than 60% (Fig. 6.1).

Rice. 6.1.

The volume of transactions in 2009 amounted to $79.3 billion. (while in 2008 - $203.3 billion). The most significant decline of about 70.1% occurred in the project finance markets of North, Central and South America.

India became the most active player in the Asian market, showing an increase in project financing by 56.6% compared to the previous year. Based on the results of 2009, the total volume of transactions in India reached 22 billion dollars.

In the Russian Federation, the volume of project financing has always been significantly lower than in many other countries, as evidenced by international ratings. Thus, in the regular rating of banks participating in project financing, which is published by the magazine Project Finance Magazine, There are no Russian banks at all. Our country appears in a number of country rankings, usually in connection with the implementation of large individual projects with foreign participation. A classic example of the use of a project financing mechanism is Nord Stream, Sakhalin-2, South Stream, Gazprom-Yuzhno-Russkoe, where the Russian Federation acted as the initiator.

Thus, in 2009, the Russian Gazprom-Yuzhno-Russkoye project entered the top ten largest project financing transactions in the world and became the fourth most important in the region EMEA(Europe, Middle East, Africa). It is obvious that resource-based industries are the most promising for expanding the use of the project financing mechanism in our country.

Currently, project financing is provided mainly by large Russian banks. However, the question of the availability of participation in project financing not only of large and largest, but also of medium-sized and small banks remains open.

Considering the many forms of bank participation in project financing, it is necessary to introduce new banking products into Russian practice that accumulate the necessary resources. We are talking about methods of raising funds widely used abroad, such as targeted and brokered deposits, conditional investment loans, social and insurance savings, general banking management funds, etc. The use of such mechanisms will allow the bank to increase the share of long-term resources with minimal risk of withdrawal and increase interest private investors in storing funds, since a potential investor, when investing in a bank, knows in advance where they will be placed. The bank actually creates collective management funds and, on its own behalf, places funds in those projects that are seen as promising by direct principals. The needs of bank savers who are inclined to individually invest funds can be met with the help of index deposits, the profitability of which is tied to the income from the project.

Public economic crisis of 2008-2009. began precisely in the area of ​​interbank lending and seriously undermined the possibilities for coordinated actions of groups of banks. As a result, the banking system was faced with objective restrictions on investment lending, which are associated with a shortage of long-term liquidity, the need to significantly increase reserves for risky loans, the problem of “bad debts” and the growth of overdue debt. The problem of lack of long-term investment resources, which are necessary for the implementation of large projects within the framework of project financing, has become more acute. In addition to traditional project financing instruments, such as project lending, large international banks actively use other financing mechanisms. For example, syndicated lending, equity financing and placement of project bonds. In this case, methods of both direct and indirect participation in the financing of large projects are used.

Thus, the problem of the lack of long-term investment resources necessary for the implementation of large projects within the framework of project financing has become significantly worse. Methods of not direct, but indirect participation in the financing of large projects are beginning to come to the fore both in the Russian Federation and abroad.

These include methods that involve the participation of banks in the placement of project bonds. The peculiarity of this scheme is that, within its framework, the bank takes part in financing the investment project not directly, but through a specially established project company, which is commonly called a special purpose company abroad - special purpose vehicle (SPV).

One of the sources of raising funds for a project company is the issue of project bonds. As with bank loans, principal and interest on project bonds are paid only from the cash flows of the project. From a special purpose vehicle's perspective, the procedure for issuing bonds is very similar to obtaining a loan from a bank. Essentially, the borrower receives resources in the form of a long-term loan. The main difference between a project loan and a project bond is that the bond issue is aimed at a wider range of potential investors interested in financing the transaction (the so-called bondholders). Investors can be not only banks, but also institutional investors, such as pension funds, insurance companies, and mutual funds specializing in infrastructure investments.

The similarities between project bonds and project loans are as follows. Firstly, quite often the bonds of a special purpose project company are purchased by a banking pool (the so-called sold transaction). Second, bonds, like any securities, can be traded in financial markets between an investor and another buyer, although in reality project bonds may be less liquid than regular corporate bonds. They are typically sold to a group of institutional investors through a private placement and remain in the portfolio until maturity.

The international project bond market is significantly smaller than the project loan market. However, the project bond market has grown significantly in recent years. It should be noted that the market is concentrated in regions such as the USA, Western Europe and Asia.

There are several reasons explaining the growth of the project bond market:

• the growing demand for the development and improvement of infrastructure requires significant investment, while governments, especially in the context of the global crisis, are not able to provide the necessary investments;
• expertise and interest on the part of institutional investors is increasing in favor of alternative investments of a medium or long-term nature with a certain balance of risk and return;
• International rating agencies are increasingly involved in the assessment of project finance transactions, which helps reduce costs and increase the availability of information for investors.

Project bonds as a source of financing are most actively used in the oil and gas sector. It is also worth noting the growth in bond issuance in the sector private finance initiative (PFf) for the last few year s.

When should project bonds be used? When financing a special purpose project company, issuing bonds is an alternative to syndicated lending - a more common form of raising funds in project financing. However, this alternative has a number of limitations and is only applicable in certain circumstances. While syndicated loans are contracts that are structured according to the needs of the project sponsors, project bonds take the form of securities that are not so easily personalized. For this reason, bookrunners ( bookrunner)" it is quite difficult to find investors willing to buy bonds with many specific characteristics, unless these investors have been identified in advance. In the case of an offering

A bond issue on secondary markets must have standard characteristics, which most likely will not meet the specific requirements of the transaction. It should be noted that bond investors (unlike banks) are most often not ready to bear the risks associated with the construction phase, accepting only the risks of the operating phase. Country risk may also be a barrier to issuing bonds if the special purpose vehicle is located in a country with a high level of country risk. Therefore, raising funds in the form of bond issues is more appropriate when refinancing a transaction when the construction stage has already passed, since in this case the bonds are more similar to asset-backed securities than to a project finance transaction.

The most common form of project bond issuance is a private placement with a pre-determined group of investors. The process for issuing project bonds in a private placement is very similar to arranging a syndicated loan by one or more lead arrangers. The set of participants is quite specific in the case of a bond issue: rating agencies, trustee, paying agent. The role of each of these participants needs to be considered.

Project bond investors have entire departments dedicated to analyzing the creditworthiness of the special purpose project company. However, they tend to make their investment decisions based on the project bond bookrunner's certification of the issuer's quality, as well as credit rating assessments by rating agencies. The assigned rating assesses the issuer's intentions and ability to repay debts on time in the short and medium term. Taking into account the peculiarities of project financing, the most significant ratings relate to the medium and long term.

Rating agencies play a key role when using such a tool for raising funds as issuing bonds, including project bonds. Some institutional investors' bylaws even prohibit the purchase of securities without a credit rating. One of the main tasks of a project bond bookrunner is to present the project to one or more rating agencies. The rating process itself is labor-intensive and time-consuming, which is why the bookrunner contacts the rating agency immediately after receiving the private placement mandate.

Foreign banks have been active participants in project financing for a long time, performing certain functions. In particular, before the global financial crisis (2007-2009), "Royal Bank of Scotland" whose diversified portfolio included energy, infrastructure, oil and gas projects. At the same time, this bank participated not only in financing the project, but also in organizing and managing the loan and financial consulting.

As the analysis showed, for many Russian banks, project financing is becoming a new large and increasingly expanding niche in the banking services market. Banks in the project finance market perform different functions (operations), the main of which are project lending, financial consulting, leasing, provision of certain guarantees, etc. In addition, banks act as investment brokers (investment banks), initiators of the creation or managers of banking consortia, institutional investors purchasing securities of project companies, leasing institutions. In the context of the investment activities (strategy) of banks, a comprehensive analysis of banks’ participation in project financing, consideration of the variety of forms and nature of participation is important.

When deciding to enter a project, banks take into account a number of factors affecting strategic development goals and economic benefits. Economic aspects include forecasts of project profitability, loan terms, optimal investment volume, the degree of control of the bank over the project, the reputation of the project initiator and other indicators that influence decision making. From the point of view of the bank's strategic interests, the financial prospects, social, economic and political significance of the project are assessed. The choice of investment area may pursue the goals of diversifying the loan or investment portfolio, as well as improving the bank’s image.

Project finance is not a standard product and requires significant labor costs, embodied in various operations, products and services of banks. Banking services under project finance are complex and complex, and transactions are active and commission-based. The development of project finance in the Russian Federation will create new demand for banks for a wide range of services, including investment consulting, investment financing, provision of guarantees, etc. In addition, as a result of the implementation of investment projects, new structures will emerge in the real sector of the economy (organizations, infrastructure facilities), which will also form their own segment of market demand for banking services, which will contribute to the development and improvement of banking activities. From this perspective, project financing acts as a means of further development of the banking sector, increasing the efficiency of its functioning and increasing its share in the financial services segment.

Project financing with the active participation of banks can be identified as a separate area of ​​analysis. The most promising areas of development within the framework of project financing are:

• participation in capital;
• consulting services;
• object financing;
• participation in foreign projects through the development of export financing mechanisms; mezzanine financing;
• leasing

It should be noted that mezzanine financing refers to mixed financing instruments - a combination and joint use of debt instruments such as loans, bonds, leasing, and equity instruments (financing through a private equity fund, IPO). The undeniable advantages of mezzanine financing include higher profitability (higher than the standard bank lending rate allows), the ability to convert debt into a block of shares or shares of the company implementing the project.

In general, the analysis of project financing allows us to identify key provisions that hinder its development.

• 1. The decisive factor is the investment rating and the current financial position of the project initiator, rather than the cash flows generated by the project. For many banks, the presence of an existing business of the borrower, as well as the presence of a positive result from the main activity, is a prerequisite for making a decision on financing a project. Thus, the bank reserves the possibility of recourse to the current activities of the borrower in the event of project failure, which is contrary to the principles of project financing. With equally effective and cost-effective proposals, the lender gives preference to projects whose initiators have an existing business in this or a related industry. As a result, a situation arises in which project financing is available mainly to large commodity companies with operating profitable businesses.
• 2. Limited long-term borrowed resources. Two key problems should be highlighted here: the low capitalization of Russian banks and the lack of “long-term” money. The use of significant leverage (i.e., high financial leverage) when financing large-scale projects is one of the key characteristics of the project finance mechanism. The ability to mobilize large-scale long-term investment resources in the required volume for a certain period and at an adequate interest rate is a necessary condition for any investment project implemented under a project financing scheme. In the Russian Federation, the capitalization of banks, as already noted, is still at a fairly low level (by world standards), which does not allow financing large and super-large projects. However, it is worth noting that there are certain positive developments in this direction. Currently, only a part of large banks, which at one time were able to enter the public or international market, are able to independently provide large and long-term investment loans. They are the main source of “long-term” money.

Very often, banks make investments in the form of traditional bank lending using all possible forms and methods of security (pledge of property, securities and other assets, bank guarantees, savings guarantee accounts escrow, guarantees). Russian borrowers can obtain direct large-scale loans for a long period either from a foreign bank or from 3-5 largest Russian banks. At the same time, only the largest companies, first-tier companies on the stock market, or those companies that can provide highly liquid collateral can receive a loan. This situation in the capital market, which allows banks to dictate their requirements for cost and lending conditions, can be characterized as an oligopoly. The absence of “long-term” sources of financing in the Russian market is expressed in the project’s payback criterion, which is established by the bank. If in some Western countries banks accept projects with a payback period of 20-30 years for financing, then in Russian banks this figure does not exceed 5-7 years.

3. Lack of development of debt financing methods and instruments

with project financing. The use of leasing in project financing is only 4-5% when investing in the authorized capital 1 . Higher rates compared to traditional lending (100-200 basis points higher), as well as the condition of payment of principal and interest without a grace period, are the reasons that hinder the use of this financing instrument.

An analysis of the bond market showed that in the context of the global crisis, the ruble bond market is rapidly declining. The foreign investment market, in particular Eurobonds, has undoubted advantages for Russian companies. The ability to attract significant amounts of funds for a longer period is a significant advantage of Western markets. However, only 15-20 of the largest Russian companies can take advantage of these advantages. In particular, the issue of Eurobonds requires serious preparation from the company; the company must prepare reports in accordance with Western accounting standards and publish them regularly, while the reports must be absolutely transparent. Also one of the conditions is the presence of ratings assigned by world rating agencies. There are still few companies on the Russian market that meet all the requirements. In addition, the difficulty of issuing Eurobonds is due to high overhead costs.

• 4. High cost of project financing is a determining factor that deters potential borrowers. The cash flows of many projects are simply not capable of providing such interest. Again, only large companies with high turnover are able to pay for such a project financing mechanism. The high interest rate is due to several factors:
  • the cost of the borrowed resources themselves;
  • risk premium;
  • overhead costs for analysis and project support.

Long-term resources are always more expensive

than short-term ones. This is due to the high cost of borrowed funds. The risks for a bank in project financing transactions are significantly higher than in commercial lending, and accordingly, the risk premium included in the interest rate should be higher. The complexity of analyzing a business plan for project financing is always greater than for commercial lending to replenish working capital, which increases the total cost of financing. These three indicators reach maximum values ​​in project finance transactions, which increases the final interest rate.

5. Consulting. Project financing is a progressive, but rather complex financial technology, in the use of which consulting plays an important role. Consulting helps reduce risks and, accordingly, reduce the cost of project financing. Poor preparation of a business plan is often cited as one of the reasons preventing obtaining bank financing. Out of 100 projects, no more than 10% are selected for further analysis and only 2-3% receive funding and reach implementation. The business plan does not reflect all the benefits of the project, the economic effect is not sufficiently substantiated and the low level of project risk is not proven 1 .

Poor preparation of the project's business plan and the inconsistency of its quality with the bank's requirements allow us to judge the low level of management of the project initiators, the lack of a team of professionals and readiness for the successful implementation of the project.

In order to develop project financing, as well as increase the role of banks in its implementation and more active use of models of “sequential bank financing” and “risk-sharing bank financing”, the following measures may be useful to improve the procedure for refinancing and risk regulation for banks accepting participation in project financing.

• 1. To develop the secondary market for the rights of claims under loan agreements concluded between banks and special project enterprises, and to provide banks with long-term financial resources, it is necessary to create a special government body to support banks financing investment projects (Project Finance Agency). Its functions should include refinancing banks on the terms of assignment of claims under loan agreements for lending to investment projects, as well as providing direct assistance to bank borrowers (special project enterprises) to restructure their existing debt obligations to banks. It is important that the possibility of state support extends to banks whose conditions for project financing of borrowers comply with the Agency’s credit standards.
• 2. In order to cover possible short-term imbalances in the provision of liquidity to banks engaged in project financing, adjustments should be made to the current procedure for lending by the Bank of Russia to commercial banks for non-marketable assets. In particular, certain requirements imposed on enterprises whose rights of claim under loan agreements are accepted as collateral for loans from the Bank of Russia (the period of activity of the borrower enterprise must be at least three years, the bank's share of participation in the authorized capital of the borrower or the enterprise's share of participation in the authorized capital bank should not exceed 20%), are initially unfeasible for bank project financing. After all, the recipient of bank loans is a new enterprise specially created for these purposes, and the bank’s participation in the borrower’s authorized capital allows for full control over a large-scale and risky project. Therefore, it is necessary to soften the existing conditions for such enterprises.
• 3. To enhance the participation of banks in the financing of investment projects, it is necessary to abandon the establishment of an economic risk standard for one borrower for project financing transactions (N6) and not to include the volume of the bank’s requirements for the borrower - a special project enterprise - in the calculation of the mandatory economic standard for the total amount of credit risks ( H7). An essential condition for the implementation of this regulatory norm should be the presence of a state guarantee for the financed project, at least in the share of the bank.
• 4. To increase the share of long-term resources with minimal risk of withdrawal and increase the interest of private investors in storing funds in the bank, it would be advisable to introduce into Russian practice targeted and brokerage deposits, conditional investment loans, social and insurance savings, and general funds of bank management. The bank actually creates collective management funds and, on its own behalf, will place funds in those projects that are seen as promising by direct principals. The needs of bank savers who are inclined to individually invest funds can be met with the help of index deposits, the profitability of which is tied to the income from the project.

Many people are now interested in investment projects. But sometimes their implementation requires additional resources. To get funds for them, you can take out a bank loan.

• VTB24 offers similar loans for a long period, and part of the amount may not be covered by the collateral. Deferments are also possible to repay the full amount. Amount from 850 thousand rubles, a small commission is charged for registration

The collateral can be equipment and buildings, goods from circulation and pledges of third parties. To get more information, contact VTB 24 representatives directly.

• Sberbank provides medium- and long-term financing such projects, financing leasing transactions and mergers and acquisitions, provides bank guarantees. Provided in rubles and foreign currencies

Clients are provided with one-time loans or credit lines are opened. When registering, limits adopted within the enterprise or based on the consideration of specific investment projects may be taken into account.

• Also loans for construction and reconstruction projects, development of agricultural complexes and other goals are offered by Rosselkhozbank for its clients. Often, loans are issued for purposes that coincide with the main activities of clients, such as agriculture, holding private plots, growing various crops, and others.

The greater the likelihood of profitability of certain projects, the more willingly the banking company will lend to them. Therefore, before approving an application, its representatives investigate all possible information.

The entrepreneur’s experience, planned budget and income from the implementation of such projects are taken into account. In this case, it is possible to attract financing from several companies at once.

Quite often, long-term loans are issued for already open projects. Often this is construction work, but it can also be the purchase of equipment, the expansion of production, or simply the continuation of one’s usual work.

Banks are less willing to take on projects that are only at the initial stage and the likelihood of their success is still difficult to assess.

To obtain such loans, you need to prepare the appropriate documents. This will often require a detailed action plan, a comprehensive justification, and contracts for property and works. We also need documents that confirm the availability of property and income of borrowers taking out a loan, as well as their share of the entire project and its income.

These loans differ from regular ones:

1. long payment period,
2. the possibility of deferments,
3. individual interest payment plan,
4. obligatory collateral.
5. The specifics of certain projects are also taken into account.

Before signing contracts, you should carefully study the rights and obligations of the parties. This will allow you to evaluate your overpayments and find out how the borrower should act in case of delays or other circumstances.

You can choose services from other banks that offer a similar service. You should also carefully read reviews about the lender before getting a loan for an investment project.

Project financing is still a fairly rare banking service. Few Russian banks declare it as a separate type of lending, and even they are in no hurry to invest in startups. However, if this is an interesting and profitable project, implemented by a team of professionals who also have experience in creating a successful business from scratch, bankers can make an exception.

Generally speaking, project financing is one of the types of targeted investment loans taken for a specific project, for example, for the creation of enterprises, modernization or repurposing of existing industries, construction of industrial, commercial or residential facilities, etc. In practice, according to According to bankers interviewed by Ko, the largest number of applications for project financing comes from the construction industry, as well as from the fuel and energy sector and telecommunications business.

No extra obligations

One of the distinctive features of project financing is the method of repayment of the loan. As Bulat Davletshin, Deputy Chairman of the Board of Ak Bars Bank explains, the only source of repayment of long-term liabilities is cash flows generated by the project itself, and assets generated during its implementation act as collateral for loan obligations. At the same time, according to the managing director of Moskommertsbank Natalya Gryaznova, project financing is interesting for the borrower precisely because of this feature, since it does not load its own balance sheet with unnecessary obligations.

“In most cases, to implement an investment project, a project company is specially created, which usually acts as a borrower and operator of the project,” says Oksana Panchenko, head of the directorate for servicing and financing corporate clients, member of the board of Raiffeisenbank. “This allows us to avoid the influence of circumstances related to the company’s past on the project, make it more transparent when determining cash flows, protect it from the influence of unrelated transactions, and optimize the distribution of risks accompanying the project between its participants.” According to the expert, the operational activities of the project company should be completely independent from the operational activities of the initiators (sponsors) of the project.

The project matters

To make a decision on participating in the financing of a particular project, banks first of all evaluate not the current financial activities of the potential borrower, but the investment project itself. According to Senior Vice President of Globex Bank Alexey Titov, the main emphasis is on analyzing the effectiveness of the financed project, its market demand, and monitoring the progress of implementation.

Naturally, the bank also analyzes the risks associated with the implementation of the project, both at its investment stage and during the operation period. The latter, as Oksana Panchenko says, includes assessing the sensitivity of an investment project to deviations from its forecast data (for example, assessing the risks of delaying the project’s entry into the operational stage, exceeding the estimated cost of construction, reducing the revenue side or increasing the expenditure side of the project at the operational stage, etc.) .

In addition, the project undergoes legal analysis, technical and technological expertise. International standards are also applied when assessing projects. Thus, since 2007, the Nordea banking group has been using the so-called “Equator Principles” approved by the World Bank and IFC, namely a set of criteria for identifying and managing social and environmental risks in project financing.

Bulat Davletshin, in turn, is confident that the provision of project financing services also depends on the risks of income and their distribution between investors, lenders and other participants on the basis of contracts and other contractual agreements. “The commercial bank is the largest lender, and in order for a company to obtain a loan for project financing, investors must offer priority terms of payment to the bank and therefore agree that they themselves will only be reimbursed after all debts due to the bank have been paid ", explains the specialist.

When banks give the go-ahead

As a rule, the processing time for an application for project financing is much longer than for a regular loan, on average - from a couple of months to a year and a half. This is understandable, because structuring and analyzing such a transaction is a priori more difficult and longer than in the case of, say, a standard loan to replenish working capital. According to Alexey Titov, in project financing, complex schemes for organizing transactions are used, structured taking into account the specifics of the project (conditions associated with the supply of imported equipment, execution of initial permitting documentation for construction, etc.), a variety of tools (loans, participation in capital , related financing). The terms of service of the provided financing are determined by the payback period of the project.

The process of a bank's work within the framework of project financing has much in common with the work of investors who enter the capital of an enterprise, or private equity funds. Thus, in particular, when implementing large projects, the bank seeks to receive its share of shares, and does not simply wait for a return of capital.

“This is due to the desire of financiers to gain, as a shareholder, the opportunity to control the project to a greater extent and directly participate in management,” explains Natalya Gryaznova. “At the same time, the bank can increase income without overloading the project with interest payments.” The average return on stocks exceeds the bank's return. By participating in the project, the bank redistributes its investments between two shares: a share with a lower but guaranteed return and a share with a higher expected but not guaranteed return.

Often the share of bank investment in a project varies from 30 to 80%. The most common situation is when the bank’s “contribution” is limited to 70%, while the credit institution expects to receive the remaining 30% from the project initiator. Most often, we are talking about the fact that this 30% should be spent at the initial stage of the project, that is, on design, preliminary preparation, obtaining permits, etc.

Bulat Davletshin gives his example: “According to our conditions, the cost of the project should be from 300 million rubles, and it is necessary to use at least 30% of the client’s own funds and/or other investors, and also, depending on whether the project belongs to a particular industry, the availability the project initiator has the rights to a land plot or production site with the necessary utility networks.”

Loan rates and schedules for obtaining and repaying them are set individually and can change at different stages of the project, depending on the progress of implementation and taking into account the borrower’s projected cash flows.

In most cases, banks impose a condition on maintaining a certain minimum level of debt coverage ratio, usually in the range from 1.2 to 1.5, depending on the stability of the project's income and the bank's credit policy. Oksana Panchenko says: “This coefficient is calculated as the ratio of the net income of each period of the project to the amount of interest and principal payments planned for this period.” Thus, the amount of net income of the project exceeds the amount of necessary payments due to the bank, which guarantees the lender the stability of payments in the event of possible deviations from the basic forecast.

In general, according to Natalya Gryaznova, project financing is more expensive for the borrower than conventional lending, since the bank’s risks when participating in a project scheme are much higher (due to the lack of collateral for the entire cost of the loan). On the other hand, with project financing, companies can always refinance the loan after the plant starts operating.

There are projects... but will there be funding?

And are there many banks in Russia today operating in the project finance market? According to Natalya Gryaznova, such a product in its classic form has never existed in our country. “Individual transactions are not an indicator of the availability of project financing services in the line of a particular bank,” says the expert. The product that is currently offered by banks still, to a certain extent, implies some kind of recourse to the client and his existing business. However, many banks have project finance departments in their organizational structure.

Credit organizations are relatively actively involved in financing investment projects within financial and industrial groups, when an enterprise, part of which belongs to the bank, is financed, or the bank services the company’s accounts. In this case, control over the implementation of the project and repayment of the loan is greatly simplified.

“It is obvious that a bank claiming to provide such a service must have two things: long-term liabilities, firstly, and a professional team, secondly,” Mikhail Polyakov, Deputy Chairman of the Board of Nordea Bank, continues the topic. He is confident that today the combination of these factors can only be observed in the largest state-owned banks and subsidiaries of foreign financial institutions. There are also international financial institutions, in particular EBRD and IFC, which independently or through the organization of syndications finance various projects in Russia in accordance with their policies.

“To use foreign experience in Russian realities, the Russian Project Finance Bank was established in Moscow with the assistance of the Central Bank of the Russian Federation and the EBRD,” adds Natalya Gryaznova, “and the Russian Center for Project Finance was created under the Ministry of Economy of the Russian Federation, which was later transformed into the Federal Center for Project Finance, and Russian Center for Foreign Investment Promotion, which was also intended to facilitate the process of financing new projects.”

According to Alexey Titov, the insufficient development of project financing in our country is associated with high risks and the lack of an effective system for their insurance, insufficient capitalization of banks, and a shortage of long-term liabilities. In addition, there are no working levers of influence on the initiators of the project due to the imperfection of domestic legislation in this area.

Andrey MOSKALENKO

Recently, more and more banks have turned their attention to developing business projects, and the latter, in turn, are also interested in raising funds. There are those who want to give money, there are those who want to take it: how can we bring both to a common denominator?

First, a little theory that will help the parties understand each other's needs.

Lending for investment projects is a special type of banking investment, which can be used by both an existing and stably operating enterprise and a new company. Features also include attracting long-term resources, that is, the borrower can finance current goals separately as necessary.

Bankers, when lending to investment projects, try to protect themselves as much as possible from high risks, so loans are subject to fairly high interest rates and are accompanied by a thorough analysis of the enterprise or company regarding the feasibility of providing financial resources and the prospects for generating income.

The time during which the issue of financing a project is decided is individual for each credit institution. Depending on the characteristics of the company being financed, the analysis of its activities may take several weeks or several months. The need to raise funds is most often associated with the implementation of one’s own innovative projects, which require attracting additional capital.

You can obtain approval from the bank for financing only by providing a detailed and complete description of the project, which includes a business plan detailing the prospects for the development and implementation of the project, as well as the expected timing of profit. In other words, you need a clear and understandable investment proposal that will be attractive to the lender.

The most common forms of investment projects are project financing, raising capital to finance construction And provision of purely investment loans.

Project financing characterized by the fact that the investing bank partially assumes the risks. For the most part, this applies to new projects in which the expected payback is calculated taking into account borrowed money. The company will pay the lender for debt and interest obligations solely from funds received as a result of the successful implementation of the project. This means that the main collateral for the capital provided by the bank is the investment project itself.

When the borrower expects to receive funds for construction of a residential, industrial or commercial facility, then, first of all, the bank will require the provision of already agreed permitting documentation, a project and estimate of the upcoming work, as well as title papers indicating a long-term lease of the land plot or ownership of it.

In these projects, bankers are especially demanding about the borrower's share in their own project. When considering an application, bank specialists scrupulously calculate the profit of the areas built in the future, taking into account their purpose - rent or sale.

Net investment lending is considered the safest, since long-term borrowed money is invested in the enterprise. The facts and results of a particular company’s activities for a specific period of time are taken into account. The method of drawing up a forecast for the development of an enterprise without investment is also practiced in order to understand what are the possibilities of using exclusively one’s own funds.

This type of investment is good for updating funds, purchasing new technological lines, re-equipping production or for other types of expansion of activities. In other words, the company works in its own direction, but has the opportunity to develop through bank investment.

Banks that provide loans to investment projects

It has been lending to investment projects for more than 10 years, being a leader in this industry. The bank provides both medium-term loans (from one year to 3 years) and long-term loans (up to 7 years), in foreign currency and in rubles. The loan can be secured by equipment, real estate and other assets sufficient to repay the full amount of the debt and pay interest for 3 months. Deferments of main payments for the investment period of project development are possible.

Bank Russian Credit offers financing of commercial projects for modernization, reconstruction, expansion of production, and creation of new capacities. The minimum investment loan amount is 1,000,000 rubles. The loan is provided for a period of up to 5 years. Security can be the right to own a land plot, real estate, shares or assets not related to the invested project, a guarantee from a bank or solvent companies.

Evgeniy Malyar

# Business loans

Investment loan: risks and benefits

Since the basis for issuing a loan is a business project, the bank actually shares potential risks with the borrower.

Article navigation

• Three types of investment loans
• Expansionary
• Design
• Building
• Requirements for an applicant for an investment loan
• Forms of investment lending
• Calculation of the profitability of the project, its payback period and investment loan parameters
• Simplified calculation example
• Conclusion

Every business owner probably has ideas about how to increase profits. The implementation of a large-scale project requires investment. The most common solution to this problem involves external lending. Investment loans have the main goal of taking the enterprise to a new level of development. The article is about their essence, features, disadvantages, who can access a loan for investment purposes and how to get it.

Three types of investment loans

An investment loan is a special type of banking product, characterized by the fact that the person applying for it has a well-developed project for using borrowed funds.

An investment loan has special features:

• Long repayment period. Most investments do not offer immediate returns. The full implementation of a strategic project requires a certain time, which is reflected in the business plan (project).
• Target orientation. An investment involves investing capital in a specific project that requires financing. This type of investment of funds involves not only the expansion of activities, but also its qualitative change for the better.
• Scale. It is impossible to borrow from a bank for an insignificant amount, justifying the need for it on investment grounds.

The project should include three main sections:

• analysis of the current financial condition of the enterprise applying for investment lending;
• the essence of the project (its economic meaning);
• calculation of the predicted profitability after the implementation of the investment project.

Based on the nature of the intended use of the loan, its belonging to one of three main types is determined.

Expansionary

Designed to expand the scale of an existing enterprise. Problems solved by the company with the help of an expansion investment loan:

• opening new branches;
• purchase of additional technological equipment;
• modernization of fixed assets;
• other similar purposes.

The peculiarity of receiving it is that until the debt is repaid, one should not count on the effect of improving the financial performance of the enterprise. All additional profit brought by modernization (and in some cases a large amount) will be spent on settlements with the bank.

When applying for an expansion loan, forecasts are based on the most pessimistic scenarios for the development of further events. Ultimately, only bankruptcy of the enterprise can prevent the fulfillment of the payment schedule. If it is assessed as probable, the loan will simply not be issued. In the best case, the interest will be set at the maximum level.

Design

The bank's risks with this type of investment lending are initially the highest. Project lending provides for the development of one of the areas, separately from the main activities carried out by the enterprise at the time of application. The managers of the company, acting as a potential debtor, hope to significantly increase the profitability of the business after the implementation of the plan.

Financing investment projects is always an adventurous business. The bank's income is formed only by the profitability of the new direction. The company being financed simply will not be able to fulfill its obligations under the contract if the project does not produce the expected effect.

Building

An enterprise can apply to a bank for a construction and investment loan only after it has incurred certain and considerable costs. This feature is due to the specific nature of the construction of real estate. Negotiations are possible if the prospective developer already owns the corresponding plot of land or has issued a long-term lease for it.

In addition to the space, the applicant will have to present design and estimate documentation, the development of which costs a lot of money. Of course, a building permit is required.

The probability of refusal when applying for a construction and investment loan is low, but it is available only to enterprises with high financial potential. The decision on approval and terms is made by the bank based on the type of facility being built and the (again, pessimistic) assessment of its likely profitability.

Requirements for an applicant for an investment loan

The standard criteria by which the bank makes regular financial borrowing are, in this case, supplemented by some specific requirements.

Investment loans for small businesses are often a way to reach a medium or even high level of business activity, but it is not easy to overcome the boundaries separating individual entrepreneurs from LLCs.

Since we are not talking about small amounts in this case, the need for a clear and convincing business plan that reveals the purpose of the project comes first. In addition, the following work is needed:

• Marketing analysis proving the feasibility of implementing the business plan.
• Agreements with partner companies capable of providing the technical ability to bring the idea to life.
• Availability of free working capital that allows you to incur operating expenses and pay off current costs. This is the so-called down payment (from a quarter to half of all planned costs).
• Ownership of collateral (security) property as personal property or as part of the constituent capital. It is subject to standard requirements: trouble-free liquidity and a market value exceeding the amount of debt.
• It is advisable that the entrepreneur has already implemented at least one investment project - this experience can affect the favorableness of the decision and the terms of the loan.

The peculiarities of investment loans include the repayment period, which almost never exceeds ten years. You should also take into account the bank’s wary attitude towards applications for refinancing projects. If the debtor was unable to pay off the primary loan, then the estimated profitability as a result did not live up to expectations. At least, this is exactly the conclusion that suggests itself.

Forms of investment lending

Based on the source of financing, investment loans are presented in five main forms:

This short table requires some explanation, indicating the specifics, advantages and disadvantages of each form of investment lending.

Bank investment loan is the most commonly practiced form of raising capital. What works in its favor is primarily accessibility. As the name suggests, it is provided to the borrower by commercial banks subject to the conditions described above.

In turn, it has several varieties, determined by the terms of the contracts and other conditions:

• urgent for an entrepreneur;
• revolving (credit line);
• design;
• underwriting.

Of the listed categories, only the concept of “underwriting” needs comments. It is similar to the bond form, but in this case the creditor bank acts as the buyer of the securities. Of course, only consistently high characteristics of the issued bonds can induce such actions.

Investment lending by a development bank, that is, in fact, by the state, is carried out when a project is of priority importance for the country’s economy. Conditions are usually preferential, but they still need to be earned. The objects of public investment are projects that meet high requirements, including:

• progressiveness of technology, confirmed by state expertise;
• environmental cleanliness;
• payback within five years or faster;
• normative terms of construction (commissioning);
• compliance with the tasks of social, economic (including foreign trade) significance facing the country.

In other words, if, as a result of the implementation of the project in Russia, the production of a product based on modern technology without damage to the environment, in demand in the domestic and foreign markets, begins, then you can count on government investment.

The requirements for foreign investors attracted through international investment are very high. However, there are several effective ways to interest foreign entrepreneurs in investing in domestic production. Among them are a favorable tax climate, highly qualified labor resources and other advantages of the Russian economy. The main “trump card” is a tempting project that promises high profits.

A synonym for the term “commodity form of investment” is the word “leasing”. By providing an enterprise with a fixed asset on the basis of a financial lease, the lessor creates conditions for increasing labor productivity, improving quality and all indicators of the enterprise.

Leasing can be financial and operational, direct and reverse. This method of economic borrowing, and in fact, investing, deserves a separate detailed description.

Finally, the fifth and final method of attracting investment lending consists of issuing securities, namely bonds that guarantee stable income in the form of interest. This distinguishes them from shares, the value of which depends on stock exchange quotes and the success of the financial performance of the issuing enterprise.

The advantage of issuing bonds for an enterprise is that the investment is made directly from the buyer of the security. The bank, before issuing a loan amount, must first find it, attracting depositors with interest on the deposit.

There are also difficulties. The main one is finding people willing to buy bonds. This is not easy: each acquirer must be convinced that the project will be profitable.

Calculation of the profitability of the project, its payback period and investment loan parameters

You should immediately accept the fact that it is impossible to predict the economic effect from the implementation of almost any project with 100% accuracy and reliability. This, however, does not mean that drawing up a business plan itself is pointless. The repayment period and interest on an investment loan always depend on how convincing the applicant’s arguments are.

A common method used by banks is to draw analogies between project parameters and the known characteristics of already operating analogues. If the introduction of some equipment brought a certain enterprise a monthly additional income, for example, 100 thousand rubles, and all other conditions (location, form of ownership, turnover, etc.) are approximately equivalent, then we can assume the same effect after the investment.

Another forecasting method is based on calculating the ROI profitability ratio. Its disadvantage is directly related to the difficulties associated with determining the expected profit. The calculation formula is as follows:

Where:
ROI– indicator of return on investment;
V.P.– gross revenue for the conditional reporting period;
VD– gross cost for the conditional reporting period;
VI– volume of investment.

Everything is clear here: the ROI indicator shows how much profit each ruble invested in the project brings. Questions arise a little later.

Gross revenue VD is formed by the unit price of the product and the quantitative sales indicator. If an entrepreneur who wants to receive an investment loan claims that he will sell each copy at a price of, for example, 100 rubles, and its cost will be 60 rubles, then it may make sense to believe him. Doubts arise when determining market capacity, which can be determined by conducting large-scale marketing research or experimentally, that is, after the fact.

The slowdown in sales leads to a decrease in the capital turnover ratio, and, as a consequence, to a deterioration in real financial indicators in comparison with planned values. Based on this, banks, as a rule, reduce forecasts to a reasonably pessimistic level when establishing a payback period and profitability. Accordingly, these indicators affect the duration of the contract and the interest rate.

Simplified calculation example

After the commissioning of a new technological line, the Rassvet enterprise will introduce a new product, Rosinka, to the market.

• The projected sales volume will be 50 thousand units. per month.
• Unit cost – 60 rubles.
• Sales price – 96 rubles.
• The cost of the line is 22 million rubles.

“Rassvet” has its own funds in the amount of 2 million 400 thousand rubles, and intends to spend this money on the purchase of the specified equipment.

The required volume of investment loan is 19 million 600 thousand rubles.

The business plan states that with these characteristics, the monthly income will be:

Using a tax calculator, you can calculate that when spending on:

• Salary 70 thousand/month.
• Current production and operating costs – 10 thousand/month.
• Depreciation – 916,667 rubles/month.
• Other costs - 5 thousand rubles,

the amount of monthly profit remaining for business development after taxes will be 629.651 thousand rubles.

The payback period for the investment To will be: