DFC offers two main debt financing products—direct loans and partial loan guaranties. Terms and conditions vary by transaction but the basic parameters are as follows:
Applicant Track Record
All projects must be within the demonstrated competence of the proposed management, which should be demonstrated by a recent, proven record of success in the same or a closely related business as evidenced by the most recent two years of historical financial statements, demonstrating a record of revenue generation and successful business operations.
The loan or guaranty tenor is typically between five and 15 years, depending on the type of project and its debt servicing capability. For loans, it is common to allow a grace period on principal repayment at the beginning of the term; however, each transaction will be evaluated on a case-by-case basis. DFC can tailor flexible disbursement and amortization, although our most common repayment schedules are quarterly or semi-annual.
DFC guaranty and loan sizes range from $1 million to $1 billion. DFC also works with co-lenders and co-guarantors to bring sufficient resources to larger projects and to increase the development impact of the transaction.
Investors must be willing to establish sound debt-to-equity relationships that will not jeopardize the success of the project through insufficient equity or excessive leverage. Although the financial structure may vary with the nature of a specific business, DFC generally will consider lending up to 50 percent of the project cost but may consider a somewhat higher participation in the case of an expansion of an existing, profitable foreign enterprise or for projects with significate off-take agreements.
Interest and fees will vary depending on the project. A summary of key costs is presented below. Please consult with your DFC finance officer for more information.
- Upfront Retainer Fee covers due diligence costs such as travel to the project site
- Facility/Origination Fee a one-time, flat fee usually paid at the time of loan or guaranty agreement signing or first disbursement
- Commitment Fee an annual percentage charged on any undisbursed amount
- Utilization Fee a bi-annual fee charged on outstanding principal under guaranty coverage
- Interest Rate a negotiated spread over the base cost of funds
- Maintenance Fee an annual fee charged to cover the cost of monitoring the loan
- Other fees related to the cost of the services of outside consultants or attorneys that may be required by DFC, related funding costs, and any expenses related to registration or notarization of documents
DFC processes transactions as quickly as all parties are able to complete the necessary procedures and documentation.
Application Review Process
The approval process takes a minimum of six to nine months from the time a formal application is submitted to commitment depending on the complexity of the project and follows the subsequent steps:
- Early Review: DFC will evaluate the credit, policy, potential development impact, alignment with U.S. foreign policy, benefits to stakeholders, and any potential deal-breakers.
- Due Diligence: Due diligence includes assessment of business potential, lender credit strength and lending strategy in the case of guaranties, background checks, and site visits.
- Approval: The project is reviewed by DFC management, credit, and investment committees for final approval. All investments and guaranties with exposure over $50 million must be approved by DFC’s Board of Directors.
- Project Close: DFC and the project company sign a legal agreement for investment or guaranty coverage. In the case of a direct loan, funds are then disbursed out to the project company, usually in tranches. For guaranties, eligible loans can then be disbursed by the guaranteed lender.
- Monitoring: DFC monitors the credit, policy compliance, and developmental impact of all projects for the life of the loan or guaranty.