Financing Your Business or Project with an SPV

Special Purpose Vehicle (SPV) financing, alsoknown as a project company, is a widely used technique for financinglarge investments (real estate, energy, industry, infrastructure).Its main advantage: enabling high leverage through debt, while isolatingthe risks and cash flows of the project. Inthis guide, discover how an SPV works, its advantages, costs, andconcrete use cases.

What is an SPV (Special Purpose Vehicle) ?

An SPV (Special Purpose Vehicle) is a company created specifically to manage a given project or asset.👉 In France, it is often a dedicated SAS (simplified joint-stock company), whose corporate purpose is limited to the financed project.

Key principle:

The financier (bank, fund, investors) finances theproject through the SPV, and not the operating company as a whole.

Why finance a project through an SPV?

1. Isolate Risks and Guaranteess

The SPV provides a financial "blank slate":

• Project assets are held within the SPV
• Guarantees are attached to the SPV
• Debts are held by the SPV

👉 If the parent company encounters difficulties, the project assets remain protected within the SPV.👉 In the event of default, the financiers can directly access the financed assets.This is the foundation of project finance.

2. Obtain More Debt (High Leverage)

Thanks to risk isolation, banks generally accept:

• Up to 80% to 90% debt financing
• Only 10% to 20% equity

This is significantly higher than in traditional corporate financing.

3. Isolate Project Cash Flows

The revenue generated by the project remains within the SPV:

• rents
• energy sales
• operating income
• tolls, royalties, etc.

The financier therefore analyzes:👉 theproject's profitability👉 theSPV's repayment capacityand not that of the entire company.

4. Protect the Parent Company

If the project fails:

• the impact is limited to the SPV
• the operating company is preserved

The potential bankruptcy of the project does not "contaminate" the main company.Another advantage:the guarantees remain within the SPV (no lien on the holding company orthe parent company).

5.  Simplify Financing Management

All financiers are involved at the SPV level :

• a single financing agreement
• the same conditions for everyone
• a clear structure

This prevents the parent company from managing multiple separate debts.

6. Improve Financial Transparency

With direct financing by the company:

• cash flows are mixed into the overall balance sheet
• it's difficult to track performance by project

With a Special Purpose Vehicle (SPV):

• all cash flows are dedicated
• profitability is transparent
• project performance is easily tracked

At what amount should an SPV be used ?

An SPV is generally relevant for financing:👉 exceeding €1 millionWhy?

• legal and structuring fees
• operating costs
• administrative complexity

For smaller amounts, other solutions are oftenmore suitable.

How much does it cost to create an SPV?

In practice:

• approximately €15,000 minimum
• variable depending on complexity
• legal fees + structuring

How long does it take to create an SPV?

Legal incorporation is quick :

• a few days to create the company

The main delays come from :

• structuring the financing
• defining the guarantees
• contracts and exit scenarios

👉 In practice: 1 to 3 weeks in simple cases.

Sectors where SPV financing is most used

SPVs are particularly well-suited to projects with high CAPEX :

• energy (solar, wind, renewables)
• real estate
• infrastructure
• industry
• transportation
• aeronautics
• heavy equipment

Concrete examples of SPV use

1. Real estate SPV for an operational activity

A company operates a restaurant or a spa.Structure :

• SPV → buys the real estate
• operating company → operates
• lease between the two

Avantages :

• easier financing
• clear guarantees
• separation of operations and assets

2. SPV to finance equipment or assets

The SPV can buy :

• aircraft
• vehicles
• industrial machinery
• infrastructure

Then lease them back to the parent company.👉 Avery common model in the aviation and transportation sectors.

3. SPV in renewable energy

Example: solar farm.The SPV:

• buys the land
• finances the installation
• assumes the debt
• signs the energy contracts

The parent company:

• builds
• operates
• maintains

Each farm = one SPV.

Operational Functioning of a Special PurposeVehicle (SPV)

The SPV may :

• have no employees
• delegate management to the parent company
• sign maintenance contracts
• sign operating contracts

The parent company acts as a service provider forthe SPV.

Advantages and Disadvantages of SPV Financing
‍
Avantages

• high debt leverage
• risk isolation
• protection of the parent company
• Financial transparency
• Easier access to financing
• Simplified multi-financier structure

Disadvantages

• Legal costs
• Contractual rigidity
• Structured governance
• Reporting obligations

Typical SPV financing structure

Investors / bank↓SPV (project company)↓Asset/ project financed↓Project cash flow (rents, revenues, sales)↓Debt repayment

Conclusion: When to use an SPV?

SPV financing is ideal when :

• The project is large (>€1M)
• The asset is identifiable
• Cash flow is dedicated
• The company wants to isolate risk
• High debt leverage is desired

It is now a standard in project finance and a key tool for developing capital-intensive projects.

‍