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Characteristics of a Financeable Project
Steps for Financeable a and Sustainable Project
For a project to be managed and coordinated effectively, it is essential that it meets certain characteristics that ensure its viability and success. —Pre-Acceptance Stage, Preliminary– The following are the fundamental aspects that a bankable project must have:
1. Internally generated cash flow forecasts must be realistic and supported by environmental approval from independent engineering, feasibility studies, and commercial projects. Cash flow should cover anticipated operating expenses, debt service, ordinary cash needs, business expenses, and a contingency buffer.
2. The contractor or contractors responsible for the design, engineering, and construction of the project must be financially sound and possess the required technical expertise.
3. Government approvals must be obtained at the local, regional, and national levels, as required by the project.
4. The national political environment must be stable, as well as compatible with several aspects of the project, such as the country's risk.
5. The process and equipment to be used for the project must be reliable and backed by proper manufacturer's warranties.
6. The suppliers of materials and energy to operate the project must be reasonably insured and at a cost consistent with the forecasts.
7. Transportation costs, both for materials and products for projects, must meet financial projections.
8. Demand for the project's products and services must be reasonably assured at levels and prices in line with forecasts.
9. The management and technical expertise to successfully launch and operate the project must be guaranteed and certified by local entities.
10. Insurance is required to protect against all necessary risks during the construction and operation of the project. In addition, a valid Global Guarantee that needs to protect the "Goods, Services, loan & Political Risk" of the entity providing the Funds.
11. Sponsors must have an equity interest in the project commensurate with their interest and risk.
12. Credit support is required for the project, either from the sponsor or a third party.
13. There must be a credit risk, not an equity risk. Financial institutions wish to take on the role of lenders only and therefore avoid taking ownership of the project.