Application of Securities in Project Finace

Project finance is nothing but sourcing funds to a long term infrastructure project, or any other project, and using the cash flow generated from the project to payback the financing procured. Issuance of securities is one of the main sources of financing. Securities refer to any form of financial instrument which are negotiable and represent an asset. Securities include bonds, stocks, asset-backed securities, and sukuk.Given to the liquidity restrictions of governments and banks, securities is recognized as a proper alternative. In fact, The accumulation of small capitals, passive investors, non-intervention in project management, flexibility in financing terms and access to a great deal of liquidity are undisputable benefits of securities and made it as an interesting tactic for financing the projects.Distinctive characteristics of project securities in comparison to corporate securities are in allocation of risks, repayment of principal and profit, responsibility of the sponsors and in the functions of the SPV.