Project finance is the funding (financing) of long-term infrastructure, industrial projects, and public services using a non-recourse or limited recourse financial structure. The debt and equity used to finance the project are paid back from the cash flow generated by the project.
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 collateral. Project finance is especially attractive to the private sector because companies can fund major projects off-balance sheet.
Together with the other stakeholders, you have to determine the most suitable financing option that will ensure you complete the project schedule.
Several options exist to finance a project:
- Loans: You will have to approach a bank or other lending institution that can provide loans for the undertaking.
- Grants: Is usual for the federal government to disburse funds to help state and local governments in initiating projects.
- Equity Investors: You can get financing for a capital project from private organizations and individuals that have an interest in the project to be constructed.
- Venture Capital: This is private equity provided by investors to small businesses that show a likelihood of long-term growth potential.
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