What is a Project Loan?
A Project Loan is a type of financing provided by banks or financial institutions to fund specific projects, such as infrastructure development, real estate construction, manufacturing plants, energy projects, or large-scale business expansions. The repayment depends on the cash flow generated by the project rather than the borrower’s general income or assets.
It is commonly used in sectors like construction, power, telecom, transportation, and industrial development.
Benefits of a Project Loan
Large Funding for Big Projects – Suitable for large capital-intensive projects.
Long Repayment Tenure – Can extend up to 10–20 years, depending on project size.
Flexible Disbursement – Funds are disbursed in phases based on project milestones.
Supports Business Expansion – Helps companies take up large projects without straining existing cash flow.
Collateral-Based Lower Interest – Usually secured by the project assets and sometimes additional collateral, leading to competitive interest rates.
Structured Financing – Tailored to match project cash flows, reducing early repayment burden.
Eligibility Criteria
Eligibility depends on the project type and size, but generally includes:
Project Feasibility: The project should have a strong business plan, profitability, and viability.
Promoter’s Background: Good financial standing, experience, and track record in managing similar projects.
Company Profile: Registered business entity (Company, LLP, Partnership, etc.).
Creditworthiness: Good credit score and repayment history.
Equity Contribution: Promoter must bring in a certain percentage of the project cost (commonly 20–30%).
Documents Required
Documentation is extensive due to the large loan amount and risk involved:
1. Identity & Legal Documents
PAN & Aadhaar of promoters and company
Certificate of Incorporation
Memorandum & Articles of Association / Partnership Deed
Board Resolution for loan approval
2. Project-Related Documents
Detailed Project Report (DPR) including:
Project overview and objectives
Technical feasibility study
Market analysis and demand forecast
Implementation schedule
Cost estimates and financing plan
Revenue projections and cash flow statements
Approvals & licenses from relevant authorities
Land documents (if applicable)
3. Financial Documents
Company’s audited financial statements (last 3 years)
Income Tax Returns (ITR)
Bank statements (last 6–12 months)
Promoters’ net worth statements
Equity infusion proof
4. Collateral Documents
Property documents offered as security
Valuation reports.