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Debt Funding

Debt Funding is predominantly used in most of the businesses. These debts are normally obtained from Banks, NBFC’s and financial institutions. Debts are primarily classified into short term & long term debts based on its repayment obligations and secured & unsecured load based on security coverage. Various Debt funding options are described below.




DEBT FUNDING OPTIONS

Term Loans are usually provided to fund capital expansion with repayment period in excess of one year. Companies can utilize term loans for long term investment such as capacity expansion, business acquisitions, infrastructure development etc. Term loan is evaluated based on the following criteria.


  • Historical performance of the company.
  • Promoters’ track record in the business.
  • Current status of the Industry in which the project is taken-up.
  • Feasibility of the project in generating cash flows and subsequent debt repayment.
  • Financial Ratios such as Debt-Equity, DSCR, BEP, IRR etc.
  • Security coverage.

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Working Capital loans are provided to companies as both Fund-based and Non-fund based limits. Working capital loans are provided based on the following criteria.


  • Current Financial position of the company.
  • Promoters’ track record in the business.
  • Industry in which the company is operating.
  • Historical trends and projected growth of the company.
  • Working capital requirement in line with Industry.
  • Financial Ratios such as current liquid ratio, Interest coverage, Profitability ratios etc.

Various types of debt funding ning Security coverage, There are many types of short term loans available to meet working capital requirements, which are described below in detail.


International Debts : The funding requirement for international transactions of exports & imports could be met from international debt options. The funding for import of capital goods could be met from either External Commercial Borrowings (ECB ) or Export Credit Agency for import of goods from European countries. For regular import of Export of goods, trade finance, Buyer’s credit, Foreign Bill discounting, international factoring facilities could be explored.


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