Executive Summary
- A composite loan combines term loan and working capital in a single sanctioned facility
- Most relevant for greenfield projects that need both simultaneously to commence operations
- Appraisal is unified, but the two components are tracked and serviced separately
- Simplifies the borrower's process compared to applying for two facilities independently
Why New Projects Need Both Facilities at Once
A greenfield manufacturing unit needs a term loan for machinery and infrastructure, but it also needs working capital from day one of operations to purchase raw material and sustain production before any revenue arrives. Applying for these as two entirely separate, sequential loan processes creates an awkward funding gap — the term loan might disburse for machinery, but the business still has no facility to fund its first production cycle.
How a Composite Loan Is Structured
A composite loan addresses this by sanctioning both components together under a single appraisal and sanction process, even though the term loan and working capital portions remain distinct in how they are disbursed, repaid, and tracked on the bank's books. The term loan portion follows standard EMI repayment; the working capital portion functions as a revolving facility renewed annually, exactly as it would if sanctioned independently.
How Appraisal Differs From a Standalone Loan
The credit appraisal for a composite facility evaluates the project as a whole — total project cost, means of finance covering both capex and initial working capital, and combined DSCR across the entire repayment structure. This is more complex than appraising a single facility, and the DPR must clearly separate and justify both the capex and working capital components rather than presenting a single blended figure.
Who Should Consider a Composite Loan
Composite loans are most relevant for genuine greenfield projects — a new manufacturing unit, a new service delivery facility — where commencement of operations genuinely depends on having both facilities in place simultaneously. An existing business adding a single piece of equipment to an already-operating unit typically does not need this structure; a standalone term loan is simpler and sufficient when working capital needs aren't materially changing.