Key Elements Of Philippines Commercial Project Finance

By Linda Jones


If you are planning to invest in a government program, there are things that you should know about the financing of such initiatives. There are usually some key parties that are involved in obtaining the funding for such big programs. This kind of funding is therefore set aside for industrial initiatives as well as many other government programs. Investors and banks that may be willing to provide the financing of such developments are usually involved in the disbursement of finds. These development programs are therefore very delicate and have to be managed well. Find out the key parties that take part in Philippines Commercial Project Finance.

Since there must be people that own the project, the first main party is called the owner or private partner. This may not necessarily be one person. It can be a group of people that form a partnership/corporation. These people are the central managers that manage all finances. Together, they form a projectco that runs the initiative and oversees borrowing, contracts and the entire construction of the program.

The second key point of the program is the sponsor. This is the individual that manages the program. He/she is, therefore, the owner of the program. If the program happens to succeed, the sponsor will get profits. The sponsor receives benefits through ownership rights or management contracts. Thus, it is the responsibility of the sponsor to see through the success of the initiative regardless of all the risks involved.

The lender is the third element of this program. The lender includes commercial banks and investment banks as well as any other institutional investor that is willing to provide loans for running the initiative. Lending is not done singularly by one lender. A group of lenders has to come together to form a syndicate that will pool funds to run the program.

Out of the lenders comes a fourth party called the agent. An agent is simply one of the lenders that has been chosen to become the main representative. Therefore, the agent will represent the other lending parties when administering the loan. The agent cannot appoint him/herself. Thus, the lenders must select one lender to become their representative. They can even vote if they have to when more than one agent has been proposed.

The fifth party involved in this financing process is called the account bank. The lenders collectively select the account bank that will hold the accounts of the program. Hence, all the money that the initiative will realize will pass through this account. This will help with accountability for all the parties involved.

Equity investors are the sixth element. These are inclusive of the sponsors as well as the lenders that have not been given an active role in running the program. The lenders can thus become shareholders and receive profits on top of their loans. The sponsors can also become shareholders and have the ability to purchase shares that other equity investors may be selling.

The contractors, customers, and suppliers are also other vital elements. Suppliers will provide materials for running the initiative. Contractors will be the designers and builders of the project while the customers will help in running the initiative as well as the cash flow.




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