Based on our experience, we have selected three issues which are often under-estimated by our clients when securing bank financing, even though they are as important as the rate of interest itself or even the different ways you can achieve the finance from different institutions.
In order to secure financing or refinancing of your project, you need to have good preparation followed by an appropriate presentation of the project to the bank. It is also very important not to under-estimate the situation, set the goals you are able achieve and include a time reserve into the project finalisation.
Information Memorandum Reflecting the Project´s Viability
Given a high number of projects available, banks have primarily been interested in those offering attractive opportunities for financing. It is important not to under-estimate the preparation of the initial application and an effective presentation of the project. You need to provide the bank with a well prepared project including a proposal for preferred conditions of financing, amount of the loan, due date or a suitable form of securing the loan.
Having acquired significant experience in preparing basic information memorandums, we are able to provide you with our assistance focusing on the following aspects:
- Project – a brief project description, main advantages, financial plan, financial modelling
- Client – history, key business partners, achievements, appreciations etc.
- Financing requirements – structured description of the required financing
A well prepared information memorandum presenting the project may have a decisive impact on a bank´s evaluation of the project and its attractiveness. A failure at this stage might lead to a bank´s refusal to provide the money for the project because of unclear potential of the project or possible difficulties in collecting all the necessary documents from the debtor.
Ing. Petr Dvořák, Senior bank consultant at UniCredit Bank Czech Republic, a.s., comments on co-operation with RSM CZ:
“We regard the projects you have sent us as a “soft” guarantee that they make sense and are prepared in the form which is suitable for us. At the same time we are able to acquire necessary information, see the key, significant aspects, the type of business a potential client is dealing with. Final summary are structured formulation of the demanded financing is vital for our internal meetings (teams including the managers and analysts) as well as approval process. Generally, memoranda prepared by RSM CZ help us analyze the project, prepare a meeting with a client and finalize the structure of our proposal more quickly.”
You Need to Knock on the Right Door (list of banks providing the money)
Based on our long-term experience in co-operating with financial institutions present in the Czech Republic, we are able to offer your request for financing to the entire banking sector dealing with the given business segment and your project in particular. Addressing the right banks and suitable working teams could save a lot of time. Banks are big institutions and for some clients it could be difficult to find their way through the maze of the numerous specialised departments. When we facilitate the request, we always address it to the particular persons who are qualified to assess the request properly and offer the relevant financing scheme.
We are well informed and keep in touch with the banks on a regular basis hence we are able to assess your project and the possibilities to finance it. Thanks to our mutual discussion we will be able to set realistic goals in terms of receiving the requested funding.
We will also assist you with another step – evaluation, comparison and recommendation of the most suitable indicative offer.
Covenants are Highly Under-estimated Threats of Future Problems
Agreeing on the right covenants, i.e. those which are acceptable for bank and feasible for you as a future debtor, is one of the most demanding tasks while negotiating the conditions of financing. We often come across clients who tend to under-estimate this aspect. You have to bear in mind that covenants are as important as for example interest rates or the form of liability, and that breaching the conditions might lead to serious problems in the future.
In cases where we assist our client in receiving funding we also provide them with modelling of future economic development and test the covenants proposed by a bank on these assumptions. If they do not match, we deal with the situation immediately.
We have re-negotiated covenants for our clients many times as the clients did not pursue a correct setting of these parameters while agreement on the provision of the funding was made and later, while the client was paying the loan off, these liabilities proved to be impossible to meet.
Project Realisation – case study
RSM CZ in co-operation with one of its clients completely managed financing of a real estate project.
Firstly, an information memorandum was drafted presenting the details of this real estate investment project amounting to CZK 200 m. The memorandum included a detailed business plan of the company as well as a financial plan and modelling of the optimal structure of the project financing.
RSM CZ took over the entire communication with the financial institutions in question, the aim being to achieve the best conditions. The process was run in permanent co-ordination with the client. We contacted selected banks requesting financing in the amount of approx. CZK 120 m. In the first round of the tender we received 8 indicative offers from banks. Having compared the structure of parameters we recommended 4 banks to proceed to the second round of the tender. In the end we recommended the bank which offered the most suitable conditions for financing the project for our client.
We managed to realize the funding of the project within six months of working on the request. The client was offered exclusive conditions for financing their project which were more suitable when compared to other offers in the market. The provided financing was prepared according to the needs and possibilities of the client, i.e. the amount of the loan, schedule and the amount of instalments, margin, better fees, a better way of insuring the loan and setting of the covenants in the best possible way.
Our client was compensated for the costs related to the provision of our consultancy services within 6 months of ensuring the financing in the form of the money saved from the previously planned financing project.
An independent consultancy might provide you with precious information and show you the right direction for future negotiations with financial institutions. We will be glad to share our experience with you and help you while preparing the documents for a bank so that you waste neither your energy nor time and maximise your chances for success. Thanks to our experience we are able to work effectively for our clients and their projects, with the minimum amount of financing starting at CZK 50 m.