Difference between project financing and traditional enterprise financing

1, the loan object is different. The financing object of project financing is the project company, and the lender takes the asset status of the project company and the economic benefits created after the project is completed and put into production as the consideration principle for issuing loans. In traditional corporate financing, the object of lender financing is the project sponsor. When deciding whether to invest in the company or provide loans to the company, the lender mainly relies on the company's current reputation and asset status and the guarantees provided by relevant units. 2. Different financing channels. In project financing, the construction funds needed for engineering projects are characterized by large scale and long term, so diversified financing channels are needed, such as project loans, project bonds, loans from foreign governments and loans from international financial institutions. In the traditional enterprise financing, the project is generally a single financing channel because of its few laws and regulations and short term. 3. The nature of recourse is different. The outstanding feature of project financing is limited recourse or no recourse. Except for the project assets and related secured assets, the lender cannot recover the assets of the project sponsor. In traditional enterprise financing, banks provide full recourse for funds. Once the borrower fails to repay the bank loan, the bank will exercise the right to dispose of its borrower's assets to make up for the loss of its loan principal and interest. 4. The repayment sources are different. The repayment of project financing funds is based on the income after the project is put into production and the assets of the project itself. In traditional enterprise financing, as the source of capital repayment, it is all the assets of the project sponsor and its income. 5. The guarantee structure is different. Project financing generally needs a rigorous and complex guarantee system, and many units with interests in the project need to guarantee the possible risks of debt funds. In traditional enterprise financing, the guarantee structure is generally simple, such as mortgage, pledge or secured loan.