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Is project finance a suitable option for small start-ups?

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Question added by Shahbaz Hayder , Group Head of Finance , Sharif Group of Companies
Date Posted: 2015/04/20
Nader Mardini
by Nader Mardini , Group Chief Financial Officer , Al Falah Readymix

Unless the start-up has a concession or an off-take agreement that provides a steady and secured stream of revenue and unless the sponsors have a track record in performance or proven-technology, I don't see how it can be a suitable option!

By definition and practice, project finance is used to finance infrastructure and industrial projects with heavy CapEx, and entails long term loans given to an SPV and secured by the cashflows of the project being financed rather than the balance sheet of the sponsors.  In other words, the project is ring-fenced and lenders have no recourse to the sponsors.

Shazia Anees
by Shazia Anees , Assistant Manager Finance , Arham Trading Company

in some cases it could be.

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