Project finance has become a major source of financing for infrastructure development .Three countries have successfully...

Project finance has become a major source of financing for infrastructure development .Three countries have successfully utilized project finance successfully such as China, Dubai and Australia.Given the reasons why a project would be financed using a project fiance Model as compared to conventional finance

Expert Solution

Project financing is the method of financing in which the Financial institutions look for the cash flows from the particular project rather than looking for the balance sheet strength of the company.

This type of financing method is highly specific in relation to the project.this type of financing does not account for the balance sheet strength of a financial company it rather advocates that funding should be obtained on the basis of the cash flow generation ability of the project because project cash flows would be able to repay the debt periodic payment schedule.

It is a type of non recourse debt financing in which borrowers and the shareholders of the borrowers have no personal liability in case of a monetary default.so this is a highly improvised form of financing in which the risk related to the project is shifted to the lender and not the balance sheet of the company. it is growing popular day by day.

I would be advocating the use of project financing over the conventional method of financing as it does not lead to a personal liability of the borrower as well as the shareholders and it shifts the liability to the landers and they are directly exposed to the risk of default.

jeff jeffy answered 2 years ago

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