Project Monitoring where the Project Financing comes from a Term Loan

Written by Milan Choo

You may come across a situation where the financing of the project of your Company comes from a term loan. The term loan may exist before the commencement of project, or that it may also exist after the project has started. Once the financing of the project comes from term loan, i.e. the banker, it would be important to have proper project monitoring, as follows:

* Project progress – the progress of the project needs to be carefully monitored. Most of often the progress would be directly monitored by the Project dept. Finance department, on the other hand, would need to keep an eye on whether the progress is on schedule. The reason being typically there is a drawdown period for term loan – if the progress of the project is delayed, the Company would not be able to drawdown the full budgeted amount during the period where the term loan is available for drawdown. Further, there is always a clause in the loan agreement that spells out imposition of penalty should there be any shortfall of drawdown amount vs the budgeted amount

* Supporting doc of project – The supporting doc of project that is used to submit to the Banker needs to be properly checked. Bankers would typically specify the requirements on types of documents that they need in order to allow for drawdown. As such, this aspect needs to be complied with

* Project visit by Banker – Banker would want to pay a visit to the Project site to understand how the project has been going on. If the project is running smoothly then there is not much to be worried about. However should there be any delay of the project, the Finance team would need to engage the Engineers up front, understand the reason for the delay and come out with a strategy on matters such as how to deal with bankers, how to present to banker during the site visit.

How can Beyond Solution Malaysia assist you?

* Speak to us if you would like to know further about financing solutions.