Structuring Credit / Loan
At KARCO, in each project, with each partner and client we always think what can be the best offer that meets the client’s requirements. We care much about our client’s opinion of our work, respect and value the results.
Working closely with our client(s), we intend to satisfy our client’s desire and total needs. Such cooperation with our loyal customers helped restructure our services and to provide new products in our offers.
A new division was created in our group to allow us to provide consultancy for to arrange finance and credits in cooperation with top banks and Export finance / credits companies for our projects.
Collaborating with top banks and financial firms, and private individual investors we can help design for medium to long-term credit facility.
Our financial engineering solutions are insured by appropriate Export Credit Insurance Agencies.
Governments: Companies owned by the government are currently not required to provide bank support.
Buyer’s bank, acting for and on behalf of the buyer can be granted credit, or such credits can be provided directly to KARCO’s buyer(s) who signs a purchase contract on turn-key basis.
These credits offer several advantages to our clients:
- A credit / financing agreement with better conditions that the local banks may offer, in terms of: duration, interest rates and related costs of credits;
- Medium to long term repayment period (5 to 7 years) after construction.
(Our experience shows an average of 7 years plus 18 to 24 months of grace period);
- A grace period can be arranged for the contract/project construction, execution and with payments to start 6 months after the targeted “Starting Date”. This allows our client’s to finish all aspects of the project, including training of staff, conduct initial operation/tests and possibly start of a full cycle production.
Characteristics of credit
- Project costs: 1000 units (excluding local expenditures)
- Loan value up to: 800 units or up to 80% of project’s costs
(Excluding land value, appropriate permits, local
Governmental requirements, water, power etc.)
- Down payment: 200 units or 20% of project’s cost (usually 25%)
- Repayment terms: Quarterly (max. semiannual) installments
- First payment: 3 months (max. six months) after the end of execution
- Interest rate: Based on CIRR (Commercial Interest Reference Rate) or
floating interest rate based on Euribor + margin.
- Insurance: Premium may be included in the value of the credit.
- Reducing performance risk: Credit disbursements are made against presentation
of documents accepted by the Buyer/our client.
KARCO and partners sign an agreement with the buyer (on turnkey). This agreement is based on expenses and success fee contract. (Usually Euro 30,000 to cover initial expenses at a rate of Euros 7,500 per month for 4 consecutive months, and 7% of value of investment and/or 4% of the contract value of finance/loan whichever is lower).
Please note that Iranian clients must pay the initial expense coverage in one lump sum at the signing of contract/agreement. Foreign clients may make payments through L/C.
- Export contract (seller/provider suitable for the project. Subject to buyer’s acceptance)
- Conclusion of forms for the credit request (authorizing us to act on behalf of the buyer/borrower)
- Negotiations and conclusion of the credit agreement (agreement arranged by us, with a lending bank)
- Purchase of an Insurance Policy (reputable insurance company acceptable to lending bank(s) for the export value of products and services to be delivered)
- Payment (20% of contract value, usually 25%). This down payment can be made to the seller directly by the buyer and or we can provide this service if the buyer lacks bank/exchange capability.
- Export of goods and services by the seller to buyer is acknowledged to lending bank.
- Submission of Documents to lending banks. This is a simultaneous process
- Payment to the exporter by the lending bank. After credit approvals and conclusion of bank to bank agreements
- Buyer’s bank commitment of repayment of the credit plus agreed charges to the lending bank (bank to bank)
- Buyer’s repayment of the credit to his bank. (3 to 6 months after operation “end of grace period”)
- Considering 7 years repayment period, 18 – 24 months grace period and payments to accrue 3 to 6 months after start of operation, the credit term is about 10 years.
Should you have questions, please do not hesitate to contact us.