What is available for a contracting base company ?

A contracting base company normally has the following characteristics :

1. No regular customers base
2. No long term contractual relationship a customer
3. No consistency in reported turnover (huge fluctuation)

Due to the above nature of the business, banks are quite reluctant to provide working capital financing (on permanent basis) to a contracting base company regardless of its background and history.

For this category of companies, a more common financing package is contract/project financing if a borrower meets the following criteria :

1. the awarding party must be a reputable and established organization or government agencies
2. the awarding party must agree to assign payment direct to lending bank
3. the nature of contract must be relevant to the principal business of borrower
4. the bank must be convinced that the borrower is able to complete the contract within the contract time frame (a bank would not agree to finance a RM100 mil. project if the borrower's turnover is say, RM10 mil. a year)
   

Of course, there is still another option, but this is going to be very tedious and lengthy process which I normally discourage, ie. CGC DAGS which I have touched on this scheme earlier.

I will discuss in further details on the project financing in separate chapter.