Both models answer the same question: how does a large project get funded before it earns money? The way they answer it could hardly differ more. Traditional project finance builds a debt structure around the project; alternative structured finance builds a funding structure around existing assets. The consequences run through every line of the term sheet.
The comparison at a glance
| Aspect | Traditional project finance | Alternative structured finance |
|---|---|---|
| Basis | Debt secured against the project | Underlying assets held by their owner |
| Security | Mortgage and pledges on project assets | No hypothecation of project assets |
| Balance sheet | Loan and debt service on the books | Non-recourse, balance sheet stays unencumbered |
| Asset control | Collateral transferred or pledged to lenders | Assets stay in the owner's custodial account |
| Repayment | Principal plus interest, on schedule | No repayment of proceeds, unless otherwise agreed |
| Guarantees | Bank and sponsor guarantees are standard | No bank guarantee from the asset owner |
| Upfront costs | Arrangement and commitment fees | No advance fees; 1.5 percent from project funds |
| First funds | Months of syndication and documentation | Within 40 banking days after compliance |
Where traditional project finance wins
Fairness requires the other column too. Bank-led project finance is a mature market with decades of precedent. For operating assets with predictable cash flows, a toll road in year ten, a leased-up office tower, bank debt is often the cheapest capital available. If a project can comfortably carry senior debt at bank pricing, it usually should.
Where the structured model wins
The structured model is built for the cases banks handle poorly: development-stage projects, jurisdictions outside the lenders' comfort zone, owners who will not pledge their project, and timelines that cannot absorb a year of syndication.
Because funding is triggered by underlying assets, cash from EUR 50 million or gold bullion from EUR 100 million, the project's own maturity matters less. Because the model is non-recourse and unpledged, the project remains bankable for conventional refinancing later. And because compliance and structuring run under the supervision of an international law firm with licensed entities and prime banks, the governance concerns that surround alternative funding are addressed structurally, not rhetorically.
Choosing between them
Three questions usually decide it:
- Does the project already produce reliable cash flow? If yes, bank debt deserves a look first.
- Are suitable assets available, own or via a sponsor? Without underlying assets, the structured model has nothing to build on.
- What must the balance sheet look like afterwards? Where debt capacity needs to stay free, non-recourse proceeds are the structural answer.
The two models can also meet in one project: several of our current mandates combine custodial capital with sovereign guarantees, and use structured proceeds precisely so that conventional debt capacity stays available for later phases. The case studies show these hybrids in execution.