In Project Financing, the sponsor can choose a non-recourse loan where the sponsor has no obligation to pay if the project didn’t make any profit with terms and conditions applied.
The Project Finance also allows the sponsor to not dilute its equity in order to put money in a project. The sponsor can finance upto 80-100 percent of the project on a high leverage basis under debt.
Project financing can also be used to maximise the tax benefits and can be used by the sponsor or the partner involved in the project as much as permissible.
The money leveraged to the sponsor comes under the non-recourse section which is why the sponsor doesn’t have to show the spent money under the debt charges in the balance sheet.