International Bank Loans

In recent decades, we have seen globalization trends that contribute to the internationalization of business and the entry of companies into world markets.

The development of technologies, a powerful political impulse, concentration of capital, improvement of communications and transport require large players to develop new markets and use international bank loans for the development and implementation of capital-intensive projects, both at home and around the world.

International financing of large business takes on a variety of forms, from lending to foreign trade operations to project financing for the construction of new facilities and long-term investment loans from international banks.

In conditions of limited resources and increased risk, external financing becomes especially important for any business project in the energy, oil and gas sector, heavy industry, agriculture, tourism and other industries.

Raising international capital is becoming one of the most effective and affordable ways to finance a business and ensure its sustainable growth.

Today it is a key factor in the success of any company’s international expansion. That is why there is a growing demand for the services of professionals with experience of fruitful cooperation with the EBRD, IFC, large portfolio investors and other international players in the financial market.

Global Investors Funding offers financing for investment projects in the European Union, USA, Canada, Australia, Latin America, the Middle East, India, China and Southeast Asia.

We offer project financing and long-term international loans from € 50 million on flexible terms.

The range of our services allows us to implement turnkey multimillion investment projects of any complexity. We are involved in financing the construction of large power plants, factories, quarries, water treatment plants, pipelines and infrastructure.

Contact our team and get professional advice at any time.

Sources of financing for international investment projects

Despite significant advances in financial engineering, alternative sources of finance still have a small market share.

Bank loans remain the main international source of financing for large investment projects.

Here, the banking sector offers the widest range of products and services, although foreign financial institutions usually have high requirements for the credit rating, financial stability and transparency of borrower.

An important role is played by the financing of export-import operations, international factoring, international investment loans and other widely demanded banking products. The banking sector also offers a range of value-added services that fully meet the needs of large companies. For example, exchange insurance, which allows you to insure the exchange rate of sales transactions in foreign currency, or surety insurance, which covers the credit risk.

Equity or debt capital?

The capital structure, which is used to finance international investment projects, consists of equity and debt capital.

Financing the development of the company's activities using equity capital increases its liquidity and financial stability.

The main source of such capital is stocks.

The contributed capital is not subject to return during the life of the enterprise, therefore it is a guarantee for investors, informing about the ability to service debt in case of losses. The share capital gives the right to participate in the profits of the company, but does not entail any obligation to pay interest.

Despite the many advantages, owners are sometimes wary of using this source of funding due to the need to transfer ownership of some of the assets to third parties and the risk of losing control over the company.

It should be remembered, however, that raising equity capital creates a “new reality,” a larger company.

Debt capital represents the company's liabilities to other organizations. It is granted for a certain fixed period, for which creditors expect interest in the form of interest. Sources of debt capital include bank loans, finance (capital) lease, bonds or other debt securities.

The significant advantages of financing international projects with debt capital are the preservation of the ownership structure and control over the company, savings in taxes, as well as the relatively low cost of financing and easy access to this type of capital. The disadvantages of using debt capital are mainly attributed to increased obligations to disclose information and an increased risk of investment activities, especially during periods of economic downturn.

The role of the stock market in financing projects abroad

Companies planning to enter foreign markets have a wide range of financing options.

However, they do not require a one-off injection of capital, but rather constant access to reliable sources of funding that will allow them to continue their dynamic growth and increase their presence in new markets. For this reason, businesses must be able to pursue competitive and long-term financial policies.

One of the most important tools for raising capital is the issue and placement of bonds on the stock markets. When issuing bonds, the company determines key parameters such as interest payments, maturity and interest rates, so the bond becomes a valuable alternative to strict bank credit, access to which is often limited.

In a situation where a company cannot meet the bank's requirements, this form of debt financing allows it to obtain the necessary funds for the construction of new facilities abroad or the implementation of a new market strategy.

The stock market offers solutions for both large businesses and small businesses, providing various forms of capital acquisition and without restricting market access for individual industries. Access to the capital market is also not limited to the stage of enterprise development. It can be used by both early stage companies and mature companies that have been on the market for a long time.

The capital market allows financing international investment projects of various sizes in the energy, oil and gas sector, mechanical engineering, electronics, transport, etc.

Businesses are increasingly realizing the many advantages of listing their financial instruments on the stock exchange, not only on national markets, but also on international stock exchanges (in particular, the LSE and NYSE). It is not only stable access to capital, but also recognition of the company and the services it provides. In addition, the placement of securities on the international stock market has a positive effect on cooperation with business partners, clients, as well as with financial institutions, mainly with banks and funds, including foreign ones.

This can go a long way towards expanding the company to international markets, combined with well-planned investment projects.

The role of international bank loans in the development of large business

By definition, an international bank loan refers to the provision of borrowed funds by some entities of the world economy to others.

Like other loans, this banking product is characterized by urgency and repayment. Often, we are talking about investment loans provided by lenders for a specific project (for example, the construction of a power plant or the modernization of the road network).

Usually, such loans are provided against assets owned by the borrower.

Lenders and borrowers can be banking institutions, private enterprises, government agencies, international and regional financial institutions. An international bank loan contributes to the greater internationalization of production processes and trade, as well as stimulates the development of the world market.

With globalization, the role of international loan in the world economy is increasing, and experts are confident in the irreversibility of this all-pervading process. In particular, credit relations between individual subjects or even entire states are deepening, the amount of loans for financing foreign trade and maintaining the balance of payments is increasing.

A rather important place in the system of international bank lending is occupied by loans that are used to refinance debt.

The attraction of external resources on a repayable basis for companies to meet the current financial needs of the business today is an acceptable practice for carrying out economic activities.

The economic essence of this process lies in the fact that companies mobilize free capital in order to find more profitable areas of application. However, the basis for the development of international lending was the output of production beyond national borders and the internationalization of economic and economic ties. International business loan is involved in the circulation of capital at all its stages, from the purchase of raw materials and equipment to the sale of finished goods and services on international markets.

Table: Advantages and disadvantages of international bank lending.

Lending to large businesses abroad is carried out both with the help of commercial banks and state lending institutions (for example, Kreditanstalt für Wiederaufbau), and through respected international institutions, including the International Bank for Reconstruction and Development (IBRD), African Development Bank (ADB), Islamic Development Bank (IsDB), European Bank for Reconstruction and Development (EBRD) or European Investment Bank (EIB).

Currently, the activities of international financial institutions and large portfolio investors around the world are closely interconnected.

For example, the refusal of one reputable bank to finance a specific investment project becomes a red flag for other institutions, which will be more careful with this proposal. For this reason, the professional preparation of the business plan and other documentation before seeking funding is critical to successfully raising the necessary financial resources on acceptable terms.

Global Investors Funding provides a full package of professional services for large business financing, including financial modeling and consulting.

Contact us to learn more about obtaining an international bank loan for your project.

International investment loans

Depending on the purpose of the loan provided to the company, we can divide them into investment loan and working capital loan.

An international investment loan is most often issued for a long term for the implementation of large projects with the participation of companies from several countries. Usually, such a loan has flexible conditions, including the so-called grace period, during which loan servicing is limited to interest without repayment of the main part of the loan.

The purpose of the investment loan is to increase the company's fixed assets, that is, the purchase / construction of buildings, machinery, equipment and finished technological lines that serve for any investment purposes.

An investment loan can finance the acquisition of two types of assets, which are listed below:

• Tangible assets, including the purchase of real estate, industrial equipment, vehicles etc.

• Intangible assets of a financial, scientific, technical and legal nature. This group includes the purchase of licenses, patents, securities, research and development costs in various areas with commercial potential.

In practice, companies most often take investment loans to set up or increase the production capacity of an existing plant.

These funds can be intended for the modernization of existing equipment or the purchase of new, acquisition or construction of fixed assets, mainly short-term and medium-term assets. Also in great demand are loans for restructuring, intended for restructuring the economic structure of the company, restoring financial liquidity in the medium and long term.

An international investment loan is often granted for a long term exceeding 5 years.

In the proposals of large banks and other financial institutions providing investment loans at the international level, one can find a wide range of conditions (maturity, interest rate, collateral for receivables).

Some banks may offer repayment of the loan after a grace period – for example, after 1-3 years from the date of the loan.

Large investment loans from foreign banks in the host country

Often, when implementing large investment projects, companies are faced with the need to attract financing from outside the host country, which may be associated with economic, tax, political and other factors.

With the internationalization of financial services, companies deciding to implement a capital-intensive project can expect to receive more affordable financing than those offered by local financial institutions.

This can be done through the host country bank that has signed an agreement with a foreign partner.

For banks, such cooperation is a way to obtain funds to finance their activities, the cost of which is usually lower than from other sources. Thus, borrowing companies can receive funds for investment on more favorable terms due to the lower interest rate on the loan.

Loans provided by foreign financial institutions are most often used to finance investment projects, rather than for ongoing commercial activities. A feature of this source of funding is, among other things, a strict definition of the type of recipient company, as well as the industry and / or type of projects funded.

Usually, international bank loans for large businesses are provided for 12-15 years, with the possibility of establishing a grace period.

The initiator's own contribution required by the foreign bank varies from one agreement to the next.

In many developing countries, entrepreneurs are interested in this source of finance because loans from foreign banks can be obtained on more favorable terms than traditional sources of finance offered in the host country. This mechanism is actively used in Latin America, Africa, East Asia, as well as in some EU countries, such as Poland, Bulgaria or the Czech Republic.

Global Investors Funding specializes in financing large companies in industries such as renewable energy, heavy industry, oil and gas, infrastructure and logistics, real estate and tourism.

If you are looking for a long-term investment loan for the implementation of a capital-intensive project, contact our experts for advice.

We are ready to provide financial support to clients anywhere in the world.