What is Project Finance ?

Every project needs financing to implement and run it successfully. Project finance is nothing but sourcing funds to a long term infrastructure project, or any other project, and using the cash flow generated from the project to payback the financing procured.

Project finance is often confused with corporate finance, but the two are structurally different. Unlike corporate finance, where a company can directly raise funds from equity and debt, in project finance, the company which invests equity (usually known as sponsor), forms a Special Purpose Vehicle (SPV) which manages the funds procurement and management of the specific project.