Project Finance Services

Established in year 2000, SR Corporate Services Pvt. Ltd. is a dynamic company driven by next generation entrepreneurs, who have imbibed values like trust and dependability into the very core of the company. It offers a comprehensive range of services for business set up including Entity Setup, Talent Solution, Accounting & Compliance, Consulting and Assurance Services. Today, being SR's client allows a company convenient access to a substantial knowledge base across various disciplines and strong resource support from team members spread across all the major cities in India.

The company equally is strong in providing the financial solutions to various SMEs in India through various financial institution and Banks. Our Financial solution products have a wide range for various business needs.

In general, project finance covers green field industrial projects, capacity expansion at existing manufacturing units, construction ventures or other projects. Capital intensive business expansion and diversification as well as replacement of equipment may be financed through the project term loans.

Working Capital Finance

Every Corporate/Firm/Entity requires working capital finance to meet the entire range of short-term fund requirements that arise within their day-to-day operational cycle.

Working capital loans can help company in financing inventories, managing internal cash flows, supporting supply chains, funding production and marketing operations, providing cash support to business expansion and carrying current assets.

There are many types of working capital finance. It is normally in the form of Fund Based Finance and Non Fund Based Finance depending upon the requirement of Industry, Trade and Service Sector. Funded facilities include cash credit, demand loan and bill discounting. Demand loans are considered also under the FCNR (B) scheme. Cash Credit facility is given against stock, so if any company is require to hold inventory in volume and for a long period, Cash Credit facility helps in keeping the inventory position. Generally bank finance 75% of the inventory value held by company on a particular day. The other mode of working capital finance is in the form of Book Debts, which is against Sundry Receivables. In all type of industry there is a trend of giving credit to its customer in order to increase the margins and sales. Bank finance 50 – 60 % of these receivables who are below 90 days. Non-funded instruments comprise letters of credit (inland and overseas) as well as bank guarantees (performance and financial) to cover advance payments, bid bonds etc.

Further these loans attract collateral security depending upon size and profile of the company. Some times it may require minimum of 30% and maximum 100% collateral as well depending upon the promoters, company’s profile and the industry.

Working Capital finance is generally subject to review every year by the bank. The same is reviewed based on the financial performance of the company. Also at the time of renewal, enhancement or new loan can be applied for.

Rate of Interest is subject to Company’s financial and managerial strength, Security offered and other factors.

Letters of Credit

Letters of Credit is generally used to facilitate purchases of goods in trading operations, both domestic and international. Letters of credit accomplish their purpose by substituting the credit of the bank for that of the customer, for the purpose of facilitating trade. There are basically two types: commercial and standby. The commercial letter of credit is the primary payment mechanism for a transaction, whereas the standby letter of credit is a secondary payment mechanism.

A commercial letter of credit is a contractual agreement between a bank, known as the issuing bank, on behalf of one of its customers, authorizing another bank, known as the advising or confirming bank, to make payment to the beneficiary. The issuing bank, on the request of its customer, opens the letter of credit. The issuing bank makes a commitment to honor drawings made under the credit. The beneficiary is normally the provider of goods and/or services. Essentially, the issuing bank replaces the bank's customer as the payee.

Elements of a Letter of Credit
  • A payment undertaking given by a bank (issuing bank)
  • On behalf of a buyer (applicant)
  • To pay a seller (beneficiary) for a given amount of money
  • On presentation of specified documents representing the supply of goods
  • Within specified time limits
  • Documents must conform to terms and conditions set out in the letter of credit
  • Documents to be presented at a specified place

To understand L/C it is also important to know the various kinds of L/C:-

Irrevocable - A letter of credit that cannot be amended or cancelled without prior mutual consent of all parties to the credit.

Revocable - A letter of credit that can be cancelled or altered by the drawee (buyer) after it has been issued by the drawee's bank.

Transferable - A letter of credit that can be redirected at the seller request.

Sight - A letter of credit that requires payment to be made upon presentation of documents.

Time Draft - A letter of credit that states payment is due within a certain time (usually 30, 60, 90, or 180 days), in other terms allows credit to the buyer.

Bank issues letter of credit based upon the creditability of the customer and his financial performance. Bank give letter of credit on the basis of certain margin varies from 10 to 25 % and some time 100% also if it does not fall into regular limit sanctioned by the bank. Rate of Interest charged and LC opening charges differ from bank to bank as per their BPLR.

Term Loan Finance

Term facility is provided by the Bank and Financial Institution to various Business entities in order to carry out the capital expenditure. The various types of Capital Expenditure includes Plant erecting, Purchase of machinery, Expansion of existing capacity or any other capital purpose. Some of the banks are also provide term loan facility for repaying high cost debt, technology upgradation, R&D expenditure, leveraging specific cash streams that accrue into company, implementing early retirement schemes and supplementing working capital. Generally Term loan is given for a period from 3 to 10 years depending upon the size of the investment and repayment capability of the company. The rate of interest is generally depends project to project and bank prime lending rate.

Term Loan can also be in the form of corporate term loans which can be structured under the FCNR (B) scheme as well, with the option of switching the currency denomination at the end of interest periods. This will help corporate to take advantage of global interest rate trends vis-à-vis domestic rates to minimize debt cost.

The bank gives corporate term loans generally available for tenors from three to five years, synchronized with specific needs. Cost involved in the above corporate term loan is may be fixed and flexible and generally linked to the bank’s prime lending rate. Repayment of the Corporate Loan can have a bullet or periodic repayment schedule, as required by the client. The repayment mode may be linked to the cash accruals of the company. Further in order to keep cash flow in order banks gives moratorium period in high capital intensive investment.

Bank Guarantees

The Bank guarantees the creditworthiness or the business capacity of its clients through its financial and performance guarantees. A bank guarantee and a letter of credit are similar in many ways but they're two different things. The main difference between the two credit security instruments is the position of the bank relative to the buyer and seller of a good, service or basket of goods or services in the event of the buyer's default of payment. These financial instruments are often used in trade financing when suppliers, or vendors, are purchasing and selling goods to and from overseas customers with whom they don't have established business relationships.

A bank guarantee is a guarantee made by a bank on behalf of a customer (usually an established corporate customer) should it fail to deliver the payment, essentially making the bank a co-signer for one of its customer's purchases.

A bank guarantee is more risky for the merchant and less risky for the bank.

A letter from a bank guaranteeing that a buyer's payment to a seller will be received on time and for the correct amount. In the event that the buyer is unable to make payment on the purchase, the bank will be required to cover the full or remaining amount of the purchase.

Banks accept full liability in both cases. With a bank guarantee, a client can default and the bank assumes the liability. Bank issues bank guarantee by taking margin in the form FDR (Fixed Deposit Receipt) ranges from 10 to 50% and some time 100% if it is not within regular limit sanctioned. Bank charge different rates for the purpose of issuance of bank guarantee depending upon the term and condition and BPLR rate.

Loan Against Property

A loan against property (LAP) is exactly what the name implies, a loan given or disbursed against the mortgage of property. The loan is given as a certain percentage of the property's market value, usually around 40 per cent to 65 per cent. Loan against property belongs to the secured loan category where the borrower gives a guarantee by using his property as security.

The purpose of the loan is not definite; one can use it for personal or commercial as well. In certain bank this product is designed to meet the requirement of entry level entrepreneur, who does not have any track record of business.

They can use this product by way of term loan or working capital facility. Purpose of the loan is to encourage SME green field projects which are at inception and because of lack of capital they could not grew. Procedure involves in this product is relaxed a bit and also rate of interest charged and processing fees is quite attractive. Once the loan is availed the same can be converted into a regular limit after certain period and of course, depend upon financial performance of the company.

Lease Rent Discounting (LRD)

Lease Rental Discounting (LRD) is a term loan offered against rental receipts derived from lease contracts with corporate tenants. The loan is provided to the lessor based on the discounted value of the rentals and the underlying property value.

This product is basically design to get finance in one shot against differed lease rental, which property may use in business or for further investment. In normal circumstance bank gives finance against lease agreement which are for a period of at least three years. Further it also depends upon the repayment capacity of the borrower.

Bank takes property as a security against this type of finance. LRD is a term loan for a period depending upon the term of lease rental agreement; the same is repayable in equal instalments.