Project Loans: How to Secure Project Financing in 2026

Project Loans Are Won or Lost Before the Lender Meeting

A viable project is not automatically a financeable project. Lenders underwrite contracted cash flow, completion risk, sponsor support, debt service capacity and downside protection. If those pieces are weak, the size of the opportunity will not compensate for it.

Project loans are used to finance assets such as solar plants, battery storage, infrastructure, data centres, industrial facilities, logistics assets and commercial real estate. In a typical structure, the debt sits at the project company or SPV and is repaid from project cash flow.

The underwriting question is not simply whether the project is attractive. It is whether the project can support a defined amount of senior debt under realistic operating and downside assumptions.

What makes a project bankable?

Contracted revenue

PPAs, offtake agreements, leases, availability payments, concessions or long-term customer contracts reduce revenue volatility and give lenders visibility over repayment.

Meaningful sponsor equity

Lenders expect the sponsor to absorb first-loss risk through equity and, in many cases, development expenditure already invested in the project.

Controlled completion risk

EPC terms, contingencies, liquidated damages, performance guarantees and cost-overrun support matter directly to credit approval.

Debt service headroom

The project must generate sufficient cash flow to meet interest and amortisation while maintaining the lender's required coverage ratios.

Project loans are sized from cash flow, not ambition

Sponsors often begin with a target leverage percentage. Lenders usually work in the opposite direction. They start with sustainable project cash flow and determine how much debt that cash flow can support.

Depending on the asset class, underwriting may include DSCR, LLCR, debt yield, loan-to-cost, loan-to-value, contracted revenue tenor and stress-case cash flow.

Debt capacity is the lower of several constraints

A project may support 70% leverage on value but only 55% once DSCR, tenor, construction exposure or revenue concentration is applied. The binding constraint determines the actual debt quantum.

The documents lenders expect

A lender should not have to reconstruct the transaction from scattered PDFs and sponsor emails. A project loan data room should normally contain:

SPV and sponsor corporate documents
Detailed sources and uses
Integrated project financial model
Project budget and construction schedule
Evidence of sponsor equity
Offtake, lease or revenue contracts
EPC and O&M agreements
Land rights, permits and licences
Technical and engineering reports
Insurance programme
Environmental or regulatory studies where applicable
Independent valuation where relevant

For renewable assets, the same principles apply to commercial solar project finance, where production assumptions, PPA quality, interconnection and construction risk drive leverage.

How the financing process actually works

1. Screen the project Review the jurisdiction, asset class, development stage, project cost, sponsor contribution, expected revenue model and funding requirement.

2. Size the debt Test the project against leverage, DSCR, tenor and downside constraints instead of relying on a sponsor-selected borrowing amount.

3. Structure the facility Define senior debt, construction drawdowns, amortisation, reserve accounts, security, covenants and any sponsor support required before completion.

4. Prepare lender materials Assemble the model, transaction memorandum, key contracts and supporting diligence into a coherent underwriting package.

5. Approach the right lenders Target institutions by ticket size, sector appetite, geography, construction tolerance and preferred risk-return profile.

6. Compare terms Assess margin, tenor, amortisation, covenants, security, recourse, fees and conditions precedent, not merely headline leverage.

7. Complete due diligence and documentation Technical, financial, legal, insurance and commercial diligence is completed before final credit approval and financial close.

Why project loan requests get rejected

The most common problem is not lack of capital. It is lack of transaction readiness.

Revenue assumptions are unsupported.
The sponsor is contributing too little equity.
Permits or land rights remain unresolved.
The EPC budget is incomplete or underfunded.
The project has no credible cost-overrun plan.
The model does not reconcile with the investment memorandum.
The requested debt amount exceeds what the cash flow supports.
The lender is being asked to take development risk outside its mandate.

A weak financing package can make a credible project look speculative. That is particularly damaging when the same transaction is circulated repeatedly through broker chains and reaches institutional lenders in inconsistent forms.

Recourse, limited recourse and non-recourse project loans

Project finance is often described as non-recourse, but many transactions contain some degree of sponsor support.

During construction, lenders may require completion guarantees, equity cure obligations, cost-overrun support or sponsor undertakings. Once the asset satisfies agreed completion tests, recourse can reduce substantially and repayment shifts primarily to project cash flow.

Security may include the shares of the project company, project assets, receivables, bank accounts, insurance proceeds, material contracts and assignment of relevant project rights.

Different projects require different lenders

A utility-scale solar project does not belong in the same lender universe as a hospitality development, a fibre network or an AI data centre.

Commercial banks may favour mature, contracted assets with conservative leverage. Infrastructure debt funds can accept longer tenors or more complex structures. Private credit lenders may tolerate greater execution risk in exchange for stronger economics, tighter controls and higher pricing.

The lender list should therefore be built around the actual credit profile of the transaction. Financely's structured lender outreach process is designed around that principle.

Project loans FAQ

Can a newly formed SPV obtain a project loan?

Yes. A project SPV may have little or no operating history. Lenders instead underwrite the project contracts, sponsor, asset base, cash flow and security structure.

Do project loans require collateral?

Usually. The security package can include project assets, SPV shares, contracts, receivables, accounts, insurance proceeds and other project rights.

How much equity does a sponsor need?

There is no fixed percentage. Required equity depends on construction risk, asset class, contracted revenue, jurisdiction, leverage and lender policy.

Can construction be financed?

Yes, provided construction risk is properly allocated. Lenders will examine the EPC contract, contingency, draw schedule, contractor strength, completion tests and cost-overrun protection.

What is the biggest mistake sponsors make?

Approaching lenders before the transaction is underwritten internally. A lender should receive a coherent financing case, not a development concept that still requires fundamental structuring.

How Financely handles project loan mandates

Financely advises on project financing structures and lender placement for eligible transactions. The work can include debt sizing, financing strategy, lender mapping, transaction materials, structured outreach, term-sheet comparison and coordination through closing.

Financely is not a lender. Any project loan remains subject to lender underwriting, due diligence, credit approval and definitive documentation.

Have a project ready for debt?

Submit the transaction for review. We will assess the funding requirement, project stage, capital structure and likely lender universe before determining the appropriate financing route.

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