Four Traits Shared by Projects Rejected at Credit Committee
Most files rejected in project finance processes are not bad projects. Four recurring structural gaps send good projects back from committee as well.
1. Revenue not secured by contract
In project finance the credit decision rests not on the company's past but on the project's future cash flow. If that cash flow is not tied to a contract — an offtake guarantee, a long-term sales agreement, a lease or a regulated tariff — then for the lender the revenue is no more than an assumption.
Merchant projects are not unfinanceable; but in that case the equity share rises, the required debt service cover ratio increases and the tenor shortens. If the file has not been built around that reality, the gap between expectation and offer ends the process.
2. Uncertainty over who bears a cost overrun
The construction period is the riskiest phase of a project. The lender expects the source that will step in on a cost overrun to be defined in advance: a sponsor undertaking, a turnkey contract, a contingency allowance or a third-party guarantee.
If that line is blank in the file, the committee automatically treats the risk as written to the lender, and declines.
3. Mismatch between revenue and debt currency
A project with lira revenue and foreign currency debt carries currency risk inside the structure. That risk can be priced but not ignored. If no currency sensitivity is shown in the file, the committee will assume the worst case itself.
The right approach is either to hedge naturally (create foreign currency revenue), to pass the risk on by contract (price indexation) or to cap it with financial instruments — whichever it is, it must appear explicitly in the file.
4. No stress case
A single optimistic scenario creates suspicion rather than confidence in a lender. What is expected, alongside the base case, is the debt service cover ratio under scenarios where revenue falls by a given margin, costs rise and commissioning is delayed.
If the ratio drops below the critical threshold in those cases, the answer is not to change the model but to change the structure: raise the equity share, add a grace period or extend the tenor. In our experience most files are, before rejection, still recoverable with that adjustment.
NART Insights
Quality of Earnings: The Gap Between Reported and Real Profit
In an acquisition the price is set not by the profit in the income statement but by normalised earnings. Where does the difference come from?
Learn moreThe Final Twelve Months Before Selling Your Company
Most of the decisions that determine value in a sale process are taken a year before the process begins. What to do in that period.
Learn moreWhat Gulf Capital Actually Looks For in Türkiye
The four priorities Gulf-based investors apply when assessing opportunities in Türkiye — and the points at which companies are caught unprepared.
Learn moreStart a mandate discussion
Tell us about your capital requirement, your transaction idea or your structuring problem. The first assessment meeting is free of charge and strictly confidential.