Tesla is getting funds worth $750 million from a number of banks, including Bank of America, JPMorgan Chase and Deutsche Bank. This new cash injection furthers concerns about the company’s dwindling cash balance and rising cash-burn rate.

Tesla Takes A Loan Of $750M - Should Investors Be Worried?

Should investors be worried?

The cash injection, which is in the form of a loan, will be $500 million initially, and the balance of $250 million will be given after some pre-set conditions are met, reveals Tesla’s SEC 8-K filing.

Tesla’s decision to get a fresh round of funding may ring alarms for many. As during the company’s fourth-quarter 2014 earnings call, Tesla CEO Elon Musk informed shareholders that the company would not be raising any additional funds and that the EV maker’s capital demands would be met from its operating cash flow. However, the CEO did mention in the same call that the company would have “staggering” amounts of capital expenditures.

So, according to a report from Business Insider, there is nothing to worry about as Tesla is doing what it already said it would do. Tesla is a tech firm which makes high-end cars, and this is something one must not forget. Being an automaker, the company has huge capital expenditures. According to The Wall Street Journal, Volkswagen plans to spend $17.4 billion in 2015 just for R&D. Also the fact that the loan is due not until 2020 eases payback pressure on Tesla.

Tesla has big spending needs

A much-needed cash injection will do a lot of good for Tesla, which has big spending plans for the next five years. This year itself, the company plans to spend $1.5 billion in capex. Tesla will be needing funds not only for its so-called gigafactory but also for producing the Model X and the Model 3. The investments will also be needed for expansion into countries like China and setting up more charging stations.

In light of such big expenses, analysts and Wall Street have been raising questions about the company’s cash burn rate. Despite concerns about the company’s liquidity, Tesla CFO Deepak Ahuja and CEO Musk believe that the company will be cash-flow positive by the end of this year. Tesla executives are confident on sales of the upcoming Model X and on the new upgraded version of the Model S, the S70D.