Rytvae Consulting · Think Right · Invest Right
Debt-Equity & Promoter Contribution
Result
Chart
Show formula & working
Project cost = Σ cost items · Term loan = Project cost × debt share · Equity = Project cost − Term loan
Promoters' contribution = Equity − Subsidy − Other investors · Promoters' cash = Promoters' contribution − Unsecured loans accepted as quasi-equity
Debt : equity = Term loan ÷ Equity
Details
How this works
Lenders finance a share of the cost of project and expect the promoters to bring the rest — the promoters' contribution or margin. It shows commitment and absorbs the first losses.
A capital subsidy and money from other investors reduce what the promoters bring. Some lenders also accept promoters' subordinated unsecured loans as quasi-equity.
Frequently asked questions
What debt : equity do lenders accept?
It depends on the project, sector and risk — often around 2 : 1 for manufacturing projects, lower for riskier ones. Lenders state it in the sanction.
Is margin money for working capital part of the project cost?
Yes. The long-term funds needed to support working capital in the first year are usually included in the cost of project.
Preparing a project report?
Cost of project, means of finance and repayment capacity are what lenders read first. Talk to Rytvae.