Project Finance

DEFINITION of 'Project Finance'

Defined by the International Project Finance Association (IPFA) as the following:

The financing of long-term infrastructure, industrial projects and public services based upon a non-recourse or limited recourse financial structure where project debt and equity used to finance the project are paid back from the cashflow generated by the project.

BREAKING DOWN 'Project Finance'

In other words, project financing is a loan structure that relies primarily on the project's cash flow for repayment, with the project's assets, rights, and interests held as secondary security or collateral.

Project finance is especially attractive to the private sector because they can fund major projects off balance sheet.

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