The due diligence process undertaken by an independent agency for the rating of a project can significantly enhance the investors' and lenders' confidence in the project. The due diligence process undertaken by the rating agency, among other things, assesses various aspects of the project, the risks involved and its business case. In consideration of these matters, the independent rating agency establishes the creditworthiness of the project. However, it may not always be possible to have independent credit rating for all projects (for example, if there is no previous experience of a similar project in the country).
The creditworthiness of a project is very important to debt financing. With a good credit rating a project can qualify for debt finance at a lower cost. The lower cost of borrowing can significantly enhance the financial viability of a project. A project with good credit rating can also be bond financed. As the cost of bond financing is generally lower than that of commercial borrowing from banks and financial institutions, bond financing can significantly enhance the financial performance of a project.