This stage further consists of the following segments:
Identification of the Project Plan - This process includes identifying the strategic plan of the project and analyzing whether it’s credible or not. This step is important for the lender in order to ensure that the project plan is in line with the goals of the financial services company.
Recognizing and Minimizing the Risk - Risk management is one of the key steps which is focused on before the project financing venture begins. The lender has every right to check if the project has enough available resources to avoid any future risks before investing in the project.
Checking Project Feasibility - A lender has to check if the concerned project is financially and technically feasible by analyzing all the associated factors before he decides to invest in a project.
It is the most crucial part of Project Financing, this step is further sub-categorized into the following:
The arrangement of Finances - The sponsor needs to acquire equity or loan from a financial services organization in order to take care of the finances related to the project. Here the goal of the financial organization is aligned with that of the project.
Loan or Equity Negotiation – At the time of this step, the borrower and lender negotiate the loan amount and come to a like-minded decision regarding the same.
Documentation and Verification - In this step, the terms an condition of the loan are mutually decided and documented keeping the policies of the project in mind.
Payment - The borrower receives the funds as agreed previously to carry out the operations of the project as soon as the loan documentation is done.
Timely Project Monitoring – Once the project commences, it is the duty of the project manager to monitor the project at regular intervals.
Project Closure - This step indicates the end of the project.
Loan Repayment - After the project has ended, it is crucial to keep track of the cash flow from its operations as these funds will be, then utilized for the repayment of the loan taken to finance the project.