Project Finance is a method of financing where a project is funded based on its future cash flows, rather than the financial strength of its sponsors.
Project Finance is commonly used for large infrastructure and industrial projects like highways, power plants, airports, and real estate developments.
In this model, lenders rely primarily on the project’s revenues (cash flows) for repayment, and the project is usually set up as a Special Purpose Vehicle (SPV).
In India, such financing is provided by banks and financial institutions under regulations of the Reserve Bank of India.
"A company builds a toll highway financed by banks, where loan repayment comes from toll revenue—this is project finance."