Project Finance & Working Capital Advisory: The Process, Start to Finish
The mechanics of Project Finance & Working Capital Advisory are what clients ask about once they have decided to proceed. The questions below are the ones raised most often in practice; the full scope of the service is on the Project Finance & Working Capital Advisory page.
How much promoter contribution (margin money) is typically required for a project loan?
There is no single statutory figure — it varies by lender, sector, and project risk profile. Banks and NBFCs commonly expect a meaningful promoter contribution and a debt-equity ratio suited to the sector. Infrastructure and capital-intensive sectors sometimes see different norms. The exact requirement for your project should be confirmed with the specific lender you are approaching, since bank-level credit policy varies.
In practice: We advise clients to plan for the higher end of the typical range rather than the minimum — a project that is thinly capitalised at sanction has less room to absorb the cost or time overruns that occur on almost every real-world project.
What is charge registration and why does it matter for a term loan?
When a company creates security — a mortgage or hypothecation — in favour of a lender, the charge must be registered with the Registrar of Companies under Section 77 of the Companies Act 2013, within 30 days of creation, by filing Form CHG-1. If that window is missed, the Registrar can allow registration on payment of additional fees up to 300 days from creation; beyond 300 days, the company must seek condonation of delay from the Central Government under Section 87 (Form CHG-8), which is a more involved process. Registration gives the lender's security legal priority over subsequent charges and creditors. An unregistered charge can be void against the liquidator and other creditors in specific circumstances, which materially weakens the lender's position — and lenders will not disburse, or will insist on this being remedied, if charge registration is not completed.
In practice: We track charge registration deadlines as part of the documentation process — it is a mechanical filing, but a missed deadline creates real legal exposure and delays the relationship with the lender at exactly the point disbursement is expected.
How is working capital requirement actually calculated for a manufacturing business?
The working capital requirement is broadly the funding gap in the operating cycle: raw material and finished goods inventory held, plus receivables outstanding from customers, minus payables extended by suppliers, converted into a rupee requirement based on projected turnover and the specific holding/collection/payment period assumptions for that business. Banks apply either the turnover method (a percentage of projected sales) or a detailed cash-budget approach that builds up the requirement from actual operating cycle data. The assessment also considers the portion of this gap the business is expected to fund from its own net working capital (long-term sources) versus bank finance.
In practice: We build the working capital assessment from the client's actual historical operating cycle data — inventory days, receivable days, payable days — rather than industry rule-of-thumb percentages, because the actual cycle is what a bank's credit team will eventually reconcile against.
What financial covenants are typically attached to a term loan or working capital facility?
Common covenants include a minimum DSCR to be maintained, a maximum debt-equity or leverage ratio, a minimum current ratio for working capital facilities, restrictions on further borrowing or creation of additional charges without lender consent, restrictions on dividend payment or related-party transactions beyond specified limits, and requirements to maintain insurance and submit periodic financial and stock statements. The specific covenant package varies by lender, facility type, and exposure size, and is set out in the sanction letter and loan agreement.
In practice: We review every covenant in the sanction letter before acceptance — some are standard and reasonable, others are negotiable, particularly around related-party transaction limits and dividend restrictions that can constrain a growing business more than the lender may have intended.
What is the moratorium period on a project loan and how is it decided?
The moratorium period is the interval — typically covering the construction/implementation phase and an initial stabilisation period after commercial operations begin — during which the borrower is not required to repay principal, though interest is usually still payable (sometimes capitalised during construction). It is set based on the realistic time the project needs to reach a stable revenue-generating stage, informed by the implementation schedule in the DPR. A moratorium set too short forces repayment before the project can realistically service debt; one set unrealistically long may be resisted by the lender as adding risk.
In practice: We build the moratorium request directly from the DPR's implementation timeline with a reasonable stabilisation buffer — not an arbitrary round number — because lenders will test whether the requested moratorium actually matches the project's realistic ramp-up.
How does PNPC charge for project finance and working capital advisory?
PNPC charges a professional fee agreed in writing before the engagement begins, typically structured around the scope of work — DPR and financial model preparation, lender liaison and proposal support, or ongoing covenant monitoring and renewal support — rather than as a percentage of the loan amount for most engagements. The exact fee depends on project complexity, the number of lenders being approached, and whether the engagement includes post-sanction documentation and compliance support.
In practice: We provide a written scope and fee letter before any work begins, so there is no ambiguity about what is included — DPR preparation, bank coordination, and post-sanction support are often priced as distinct components depending on what the client actually needs.
How does a real estate or infrastructure project's financing differ from a manufacturing project's?
Real estate and infrastructure projects typically have longer gestation periods, different revenue recognition patterns (pre-sales/booking-linked for real estate, concession or annuity-based for many infrastructure projects), and often involve project-specific regulatory approvals (RERA registration for real estate, environmental and sector-specific clearances for infrastructure) that directly affect the financing timeline and structure. Escrow mechanisms for customer collections are common in real estate project finance, and infrastructure projects frequently involve concession agreements, government counterparty risk, and specialised infrastructure NBFC or bank financing windows with their own appraisal norms.
In practice: We structure the DPR and financial model differently for these sectors — real estate models need a phase-wise sales and construction-linked cash flow build, while infrastructure models need to reflect the specific revenue mechanism (toll, annuity, tariff) under the underlying concession or contract.
What is a subordinated debt or quasi-equity instrument and how does it help with margin money?
Subordinated debt is a loan — often from the promoter or a related party — that ranks behind the senior bank/NBFC debt in repayment priority, meaning it is only serviced after senior lender obligations are met. Some lenders will count properly structured, formally subordinated promoter debt toward the promoter's contribution requirement, provided it is genuinely subordinated in the loan documentation and not simply an informal unsecured loan. This can help bridge a margin money gap without requiring a full equity infusion, particularly where promoters want to preserve their equity stake.
In practice: We structure subordinated debt arrangements with explicit subordination language in the documentation from the start — lenders will not retroactively treat an informal promoter loan as qualifying margin money if it was not structured that way at the outset.
Why should we engage PNPC rather than approach the bank directly ourselves?
Banks and NBFCs appraise proposals against internal credit norms that a business owner, focused on running their operations, is not positioned to anticipate. A proposal prepared without professional structuring typically returns with queries on DSCR sensitivity, promoter contribution adequacy, or documentation gaps — each round of queries adds weeks. PNPC prepares the DPR and financial model to the standard credit teams actually test, structures the promoter contribution and facility mix correctly the first time, negotiates sanction terms before they are locked in, and stays engaged through disbursement and ongoing covenant compliance — not just the initial application.
In practice: A self-prepared proposal that sits with a bank without traction is often held up by how it is presented rather than by the business itself; restructuring the DPR and financial model into a bankable format can help.
Where this sits in the wider engagement
Project Finance & Working Capital Advisory rarely arrives on its own. The statutory basis and the current requirements are set out on the Project Finance & Working Capital Advisory service page, and the related services are grouped under Corporate Finance.
What PNPC does
PNPC Global has practised since 1986 across India and the UAE. On Project Finance & Working Capital Advisory we take the work end to end — reviewing the facts, preparing and filing what is required, and dealing with the authority through to closure.