Structured Finance
When a Standard Product Is Not the Complete Answer
Structured Finance
When a Standard Product Is Not the Complete Answer
Some business requirements need a structure developed around the transaction rather than a pre-defined product.
A complex requirement may involve multiple assets, different cash-flow stages, project milestones, contractual receivables, existing obligations or a strategic business event. In such cases, a standard finance structure may not sufficiently reflect:
- The timing of capital deployment
- The source of repayment
- Business and transaction risk
- Existing assets and liabilities
- Promoter contribution
- Project milestones
- Security availability
- Expected value creation
Structured finance aims to bring these elements together into a considered transaction framework.
Where Structured Finance May Apply
Subject to the company’s approved mandate:
- Project-specific expansion
- Cash-flow-linked finance
- Acquisition-related requirements
- Refinancing of eligible obligations
- Promoter-backed business initiatives
- Multi-stage capital deployment
- Contract or receivable-backed structures
- Special business situations
- Secured structured transactions
- Growth-stage capital
- Business restructuring
Seven Questions That Shape the Structure
- 01
Understand the Requirement
What is the precise commercial purpose?
- 02
Map the Transaction
Who are the parties, what are the assets, and how will money move?
- 03
Identify the Repayment Source
What cash flow, asset or defined business event may support repayment?
- 04
Evaluate Risk
What happens if revenue, cost or timing assumptions change?
- 05
Structure Protection
What security, covenants, controls or milestones may be appropriate?
- 06
Align Expectations
Do all parties understand the commercial terms and responsibilities?
- 07
Monitor Performance
What information should be reviewed through the transaction period?
Building Blocks of a Custom Structure
Depending on regulatory permission and transaction requirements, a structure may draw on features such as:
- Customised tenure
- Moratorium
- Amortising repayment
- Bullet repayment
- Milestone-linked disbursement
- Cash-flow-linked repayment
- Escrow mechanism
- Asset-backed security
- Receivable assignment
- Financial covenants
- Promoter undertakings
- Periodic reporting
- Additional risk protection
These features are illustrations of how a structure may be designed for a specific transaction; they are not a list of standard products.
What to Prepare
- Detailed transaction note
- Company and promoter profile
- Historical financial statements
- Current financial information
- Existing debt schedule
- Cash-flow projections
- Transaction counterparties
- Asset and security details
- Legal documents
- Project or acquisition information
- Repayment plan
- Risk-mitigation proposal
Frequently Asked Questions
What is structured finance?
A financing arrangement developed around a specific transaction — its timing, repayment source, assets and risks — rather than a pre-defined product.
When should a business consider structured finance?
When capital is deployed in stages, repayment depends on a specific contract or event, several assets or parties are involved, or existing obligations need to be addressed alongside fresh capital.
Can repayment be linked to project cash flows?
A cash-flow-linked or milestone-linked structure may be considered where appropriate, legally permitted and supported by the transaction.
What should a transaction note include?
The commercial purpose, parties and assets involved, how money will move, the proposed repayment source, key risks and the security or protection available.
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Submission of an enquiry does not constitute an approval, commitment or offer of finance.
