Comprehensive Guide and Alternative Options

Mill facilities and equipment are projects that require high investment costs. The selection of appropriate financing sources and models is a strategic decision that directly affects the payback period, profitability, and sustainability of the investment. The right financing structure plays a key role in project success and creating competitive advantage.

As Tanış A.Ş., with our over 60 years of sector experience and strong financial institution partnerships, we provide comprehensive support to our customers in accessing the most suitable financing sources for mill projects. In this content, we examine in detail the financing options specific to the mill sector, alternative financing sources, and application processes.

Commercial Bank Loans and Investment Loans

Bank loans, the most common financing source for mill projects, offer various options suitable for different needs and project phases:

Mill Investment Loans:

• Term: Generally 5-10 years (depending on equipment and facility life)
• Interest Structure: Fixed or variable (TLREF/Libor + spread)
• Grace Period: 6-12 months (depending on project installation period)
• Collateral Structure: Project assets, mortgages, corporate guarantees

Many Turkish banks offer specialized credit packages for the mill sector. These packages typically include repayment plans based on sector-specific cash flow projections, seasonal payment options, and supplier financing integration.

Required Documents for Application:

• Business plan and feasibility report
• 3-year financial statements and projections
• Project technical details and equipment list
• Collateral documents

Project finance used for large-scale mill complexes is based on the project’s future cash flows and typically has the following characteristics:

• Project-specific special purpose vehicle (SPV) structure
• Cash flow-based repayment plan
• Limited recourse or non-recourse financing structure
• Risk sharing mechanisms

Project finance is suitable especially for large integrated facilities over $20 million and typically requires 30-40% equity contribution. Key success factors in this structure:

• Reliable and detailed feasibility study
• Experienced project sponsors
• Strong raw material supply agreements
• Comprehensive technical and financial analysis

Working Capital Loans and Short-Term Financing

Working capital financing options that mill operations need for daily operations and raw material supply:

• Revolving Credits: Credit limits that offer flexible usage opportunities, typically renewed annually
• Overdraft Accounts: Account structure providing flexibility for the operation’s instant cash needs
• Factoring: Opportunity to convert receivables to cash early
• Supplier Financing: Structuring supplier payments on a deferred basis

These financing instruments are critically important for managing seasonal cash flow variations, especially during harvest periods when wheat purchases intensify.

Financial Leasing and Its Types

Mill equipment is ideal for leasing due to high investment costs and long economic life. Key advantages of leasing:

• Low initial cost (typically 0-20% down payment)
• Off-balance sheet financing opportunity
• VAT advantage and tax savings
• Flexible structuring options

Leasing Types and Comparison:

Financial Leasing: Structure where asset ownership transfers to the lessee at the end of the lease period, typically 4 years and above Operational Leasing: Short-medium term structure where the asset is returned to the lessor at the end of the lease, may also include maintenance and repair services Sale and Leaseback: Model that creates cash by selling existing equipment and simultaneously leasing it back

Considerations in mill equipment leasing:

• Compatibility of contract term and payment plan with equipment economic life
• Insurance and maintenance responsibilities
• Technological obsolescence risk and upgrade options
• Residual value determination