Non-recourse financing is a financing concept in which several project participants pursue an investment project and as a rule, lenders can only access their creditworthiness in the amount of equity contributed by the project promoters (non-recourse = ” recession-free “).


Non-recourse financing is characterized by three features:

  1. Cash flow- related lending: All obligations (including interest and repayment of borrowings) are borne out of the expected future cash flows of the project. Therefore, the financing decision is based primarily on the future prospects of success of the investment project.
  2. Off Balance Sheet Financing: Financing is off-balance financing and thus, from the point of view of the project executing agency, balance sheet neutral. Debts and assets of non-recourse financing can only be found in the balance sheet of the special purpose vehicle, which becomes the sole borrower and is not included in the scope of consolidation of the project promoters. Called SPC (Special Purpose Company), SPV (Special Purpose Vehicle) or SPE (Special Purpose Entity).
  3. Risk Sharing: There is an appropriate distribution of risk among the various project participants. These are not only the project sponsors (sponsors) but possibly also suppliers, customers or operators.



Non-recourse financing is primarily used to finance large-volume investment projects if classic corporate financing is not possible (insufficient creditworthiness of individual promoters or special risks).

In practice, therefore, it is usually used to finance major national and international projects (power plants, infrastructure, complex facilities).

In Germany, non-recourse financing is therefore also referred to as “project financing”.

A combination of public and private promoters is possible and common.

Variations of non-recourse financing

Variations of non-recourse financing

Since the standard case of non-recourse financing is normally relatively risky for the lender and banks are correspondingly restrictive when lending, in practice two further variants have emerged: limited recourse financing and full recourse financing.

Under limited recourse financing , the lender may have access to the promoter (s) beyond the company deposit . Thus, a liability in terms of time, amount or situational liability of the promoters beyond their company contribution is conceivable.

Full-recourse financing, on the other hand, even allows full and unconditional recourse to the project’s equity providers . Accordingly, it is no longer counted as project financing in the actual sense.

Financing structure

Due to their relative size, non-recourse financing is generally not bilateral (bank-only). Instead, non-recourse financing is usually arranged as structured finance in the form of a syndicated loan.

Due to the often high start-up costs and the long start-up period, non-recourse financing generally takes place over the long term (15 years + x).

Excess use

The use of the generated surpluses from the project follows the so-called “waterfall principle” in this order:

  1. the maintenance of the project,
  2. Interest and repayment to borrowers and
  3. Distributions to the EC donors.

Leave a comment

Your email address will not be published.