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Project financing clause: Copy, customize, and use instantly

Introduction

A project financing clause outlines the terms and conditions under which a company raises funds for a specific project. This clause specifies the sources of funding, repayment terms, security, and other relevant conditions related to the financing of a defined project, ensuring that both the lender and the company have clear expectations and obligations.

Below are templates for project financing clauses tailored to different scenarios. Copy, customize, and insert them into your agreement.

Standard project financing clause

This version outlines basic terms for project financing.

The [Company] agrees to raise capital for the [specific project] by securing a loan of [$X], which shall be repaid through project-generated revenues. The loan shall be repaid in equal monthly installments over a period of [X] years, beginning on [Date].

Project financing clause with collateralized assets

This version includes collateralized assets for financing.

The loan issued for the [specific project] shall be secured by [Company]’s assets related to the project, including [list assets such as equipment, intellectual property, or real property], which the lender may claim in the event of default.

Project financing clause with cash flow-based repayment

This version includes cash flow-based repayment.

The repayment of the loan will be structured based on the expected cash flows from the [specific project], with payments to be made from [Company]’s revenue generated by the project. If the project’s cash flow is insufficient, the lender may extend the repayment period.

Project financing clause with interest rate linked to project milestones

This version links the interest rate to project milestones.

The interest rate on the project financing will be set at [X]% per annum, with the possibility of adjustment based on the achievement of specific project milestones, as outlined in [Schedule X].

Project financing clause with deferred interest payments

This version allows deferred interest payments.

The [Company] shall defer the payment of interest for the first [X] months of the project financing term. Interest will begin accruing from the first month but will be payable in a lump sum at the end of the deferral period.

Project financing clause with a fixed project cost

This version specifies a fixed project cost.

The total cost of the [specific project] is fixed at [$X], and the [Company] agrees to complete the project within this budget. Any cost overruns will be the responsibility of the [Company] and shall not affect the terms of this financing.

Project financing clause with milestone-based disbursements

This version includes milestone-based disbursements.

The lender will disburse the loan in installments, with each installment tied to the completion of specific milestones in the project as detailed in [Schedule X]. If the milestones are not met, the disbursement may be delayed or withheld.

Project financing clause with revenue participation rights

This version includes revenue participation.

The lender shall have the right to participate in the revenues generated by the [specific project] in addition to receiving regular loan repayments. The lender’s share of the revenue will be [X]% of net project income, until the loan is repaid in full.

This version includes a risk-sharing mechanism.

The [Company] and lender agree to share certain project risks, including [e.g., construction delays, cost overruns]. Both parties will contribute to mitigating these risks by [list mitigation steps, e.g., obtaining insurance, setting aside contingency funds].

Project financing clause with performance guarantees

This version includes performance guarantees.

The [Company] shall provide performance guarantees for the successful completion of the [specific project], which include guarantees from [subcontractors, insurance policies] to cover any shortfalls or failure to meet the project’s milestones.

Project financing clause with completion bonus

This version includes a completion bonus.

The [Company] agrees to pay the lender a completion bonus of [$X] upon the successful and timely completion of the [specific project], which is defined as [specific criteria, e.g., project delivered on time and within budget].

Project financing clause with early repayment option

This version includes an early repayment option.

The [Company] may repay the loan in full before the maturity date, without penalty, provided that all accrued interest is paid, and any outstanding conditions for early repayment are satisfied.

Project financing clause with drawdown facility

This version includes a drawdown facility.

The [Company] shall have access to a drawdown facility for project-related expenses, with the loan amount available for withdrawal as required during the project’s lifecycle, up to a maximum of [$X].

Project financing clause with right to audit

This version includes the right to audit.

The lender shall have the right to audit the financial records of the [Company] related to the project, including receipts and expenditure reports, to ensure that loan proceeds are being used in accordance with the project plan.

Project financing clause with refinancing option

This version includes a refinancing option.

The [Company] may, after [X] years, refinance the loan at prevailing market terms to adjust for better financing rates, subject to the lender’s approval and satisfaction of refinancing conditions.

Project financing clause with environmental compliance requirements

This version includes environmental compliance terms.

The [Company] shall ensure that the [specific project] complies with all applicable environmental laws and regulations. Failure to meet these requirements will constitute a default under this agreement, and the lender may demand immediate repayment of the loan.

Project financing clause with insurance requirement

This version includes an insurance requirement.

The [Company] shall maintain insurance coverage for the [specific project] for the duration of the financing term, including coverage for property damage, business interruption, and liability, with the lender listed as an additional insured party.

Project financing clause with termination rights for lender

This version gives termination rights to the lender.

The lender has the right to terminate the financing agreement and demand immediate repayment of the loan if the [Company] fails to meet the project’s key performance indicators, milestones, or other conditions outlined in this agreement.

Project financing clause with repayment based on project sales

This version ties repayment to project sales.

The loan will be repaid based on the sales generated from the [specific project]. The [Company] shall repay the loan from the revenues of the project, with a percentage of each sale allocated toward loan repayment until the loan is fully satisfied.

Project financing clause with contingent repayment based on success

This version ties repayment to the success of the project.

The loan repayment is contingent upon the success of the [specific project]. If the project does not meet the financial projections or other criteria outlined in this Agreement, the repayment schedule may be modified or delayed.

Project financing clause with deferred loan repayment

This version defers loan repayment.

The repayment of the loan principal may be deferred for up to [X] years, with interest payments due quarterly. The full loan principal shall be repaid in one lump sum at the end of the deferment period.

Project financing clause with performance bonds

This version includes performance bonds.

The [Company] shall provide a performance bond to the lender for the [specific project], guaranteeing the successful completion of the project in accordance with agreed-upon specifications and timelines.

This version includes a revenue-sharing agreement.

The lender shall receive [X]% of the project’s net revenue as repayment towards the loan, in addition to the scheduled principal payments, until the total debt is repaid.

Project financing clause with project cost escalation clause

This version allows for cost escalation.

If the costs of the [specific project] increase due to unforeseen circumstances, the [Company] may adjust the financing terms with the lender to cover the additional costs, subject to lender approval.

Project financing clause with equity kicker

This version includes an equity kicker.

As part of the financing agreement, the lender shall receive an equity kicker, entitling them to [X]% of the project’s profits or an equity stake in the [Company] if certain financial milestones are met.

Project financing clause with lender’s right to step in

This version includes the lender’s right to step in.

In the event of a material breach or delay by the [Company], the lender shall have the right to step in and manage the [specific project] to ensure completion and protect their financial interests.

Project financing clause with performance incentives

This version provides performance incentives.

If the [Company] completes the [specific project] ahead of schedule or under budget, the lender shall pay a bonus of [X]% of the loan amount as an incentive for exceptional performance.

Project financing clause with conversion option to equity

This version includes a conversion option.

The lender has the option to convert up to [X]% of the loan balance into equity in the [Company] at any time before the loan is fully repaid, at a conversion price of [$X] per share.

This version restricts related-party transactions.

The [Company] agrees not to enter into any transactions with related parties, including affiliates or shareholders, without the prior consent of the lender, to prevent potential conflicts of interest.

Project financing clause with interest-only payments until project completion

This version allows interest-only payments until project completion.

For the duration of the [specific project], the [Company] shall make interest-only payments on the loan, with full principal repayment due upon project completion or within [X] months thereafter.

Project financing clause with lender’s right to approve project budget

This version gives the lender approval rights over the budget.

The lender shall have the right to approve the final budget for the [specific project], and any material deviations from the approved budget must be communicated and approved by the lender in writing.

Project financing clause with reporting obligations on project progress

This version includes reporting obligations.

The [Company] shall provide the lender with quarterly updates on the progress of the [specific project], including financial statements, budget performance, and any issues or delays affecting the project’s completion.

Project financing clause with restriction on borrowing additional funds

This version includes a restriction on additional borrowing.

The [Company] agrees not to borrow additional funds for the [specific project] without the prior written consent of the lender, to ensure that the project remains within the agreed financing terms.

Project financing clause with schedule for loan disbursement

This version includes a disbursement schedule.

The loan shall be disbursed in accordance with the following schedule: [list disbursement amounts and timelines]. The lender will release the funds in tranches, upon the achievement of specific project milestones.

Project financing clause with prepayment penalty

This version includes a prepayment penalty.

If the [Company] elects to repay the loan earlier than the agreed repayment schedule, a prepayment penalty of [X]% of the remaining loan balance will apply, except in the event of a refinancing or sale of the project.

Project financing clause with security interest in future revenues

This version includes a security interest in future revenues.

The loan shall be secured by a claim on the future revenues of the [specific project], and the lender shall have the right to access these revenues to satisfy any outstanding loan obligations.

Project financing clause with collateral in the form of real estate

This version includes real estate collateral.

The loan for the [specific project] will be secured by a first lien on the real estate owned by the [Company], located at [address], and the lender will have the right to foreclose on the property in the event of default.

Project financing clause with lender’s approval for key contracts

This version requires lender approval for key contracts.

The [Company] shall obtain the lender’s approval before entering into any key contracts related to the [specific project], including construction contracts, supplier agreements, or joint venture agreements.

Project financing clause with step-up repayment structure

This version includes a step-up repayment structure.

The loan shall be repaid in increasing installments, with the first [X] months of repayments consisting only of interest. Principal repayments will then increase by [X]% every [X] months until the loan is fully repaid.

Project financing clause with flexibility for cost overruns

This version includes flexibility for cost overruns.

If the total cost of the [specific project] exceeds the estimated budget by more than [X]%, the [Company] shall notify the lender immediately and agree on a revised repayment schedule to accommodate the cost overrun.

Project financing clause with lender’s right to monitor project

This version gives the lender monitoring rights.

The lender shall have the right to monitor the progress of the [specific project] and conduct periodic site visits to ensure that the project is proceeding in accordance with the agreed terms, timeline, and budget.

Project financing clause with provision for third-party audit

This version includes provisions for third-party audit.

The [Company] agrees to allow a third-party auditor, selected by the lender, to audit the financial records of the [specific project] annually to ensure that the loan proceeds are being used properly.

Project financing clause with fixed loan term

This version includes a fixed loan term.

The loan issued under this Agreement will have a fixed term of [X] years, with principal and interest payments to be made quarterly. The loan will be repaid in full by [maturity date].

Project financing clause with cost-plus funding

This version includes cost-plus funding.

The loan amount will be calculated based on the actual costs incurred in the [specific project], plus a [X]% margin to cover overheads, to be repaid upon completion of the project.

Project financing clause with mandatory reporting on financial performance

This version includes mandatory reporting.

The [Company] agrees to provide the lender with detailed financial performance reports every [X] months, including income statements, balance sheets, and cash flow statements specific to the [specific project].

Project financing clause with restricted use of loan funds

This version restricts the use of loan funds.

The loan proceeds shall be used exclusively for the [specific project] as detailed in the project budget, and any deviation from the intended use of funds will require the lender’s approval.

Project financing clause with optional second loan facility

This version includes an optional second loan facility.

The [Company] may, at its discretion, apply for a second loan facility for the [specific project] to cover additional costs, which shall be subject to the lender’s approval and the same terms as the first loan.

Project financing clause with loan payments tied to project revenue

This version ties loan payments to project revenue.

Repayments of the loan will be based on the actual revenue generated by the [specific project], with payments made in equal monthly installments calculated as [X]% of the project’s monthly revenue.

Project financing clause with grace period for repayment

This version includes a grace period.

The [Company] will be granted a grace period of [X] months after the loan’s disbursement before the first repayment installment is due. During this period, the loan will accrue interest but no payments will be required.

Project financing clause with escalation of loan repayment

This version includes an escalation in repayment.

The repayment schedule for the loan shall increase by [X]% every [X] years, based on the project’s anticipated growth and ability to meet repayment obligations.

Project financing clause with lender’s right to approve subcontractors

This version gives the lender approval rights over subcontractors.

The [Company] shall not engage any subcontractors for the [specific project] without the prior approval of the lender, who may reject subcontractors based on their financial stability or reputation.

Project financing clause with option for lender to co-invest

This version includes an option for the lender to co-invest.

The lender shall have the option to invest additional capital into the [specific project] at the same terms as the original loan, upon mutual agreement between the [Company] and the lender.

Project financing clause with joint project oversight

This version includes joint oversight of the project.

The [Investor] and the [Company] will jointly oversee the execution of the [specific project], with regular meetings to review project progress, financial performance, and compliance with the financing agreement.

Project financing clause with loan draw schedule

This version includes a loan draw schedule.

The loan will be drawn down in installments based on project milestones. Each drawdown request must be accompanied by a progress report and documentation proving that the relevant milestone has been met.

Project financing clause with approval for amendments to the project

This version requires lender approval for amendments.

The [Company] shall seek the lender’s approval before making any significant amendments or changes to the scope, budget, or schedule of the [specific project] during the financing term.

Project financing clause with repayment through equity conversion

This version allows repayment through equity conversion.

The loan may be repaid by converting a portion of the outstanding debt into equity in the [Company] at a conversion rate of [$X] per share, subject to the lender’s discretion.

Project financing clause with provision for penalties due to delays

This version includes penalties for delays.

If the [Company] fails to meet the project milestones as outlined in the financing agreement, the [Company] shall incur penalties equal to [X]% of the loan amount for each delayed milestone.

Project financing clause with performance-based disbursements

This version ties disbursements to performance.

The lender agrees to release the loan funds in tranches, with each tranche being contingent upon the [Company] meeting performance objectives as outlined in [Schedule X].

Project financing clause with right to prepay without penalty

This version allows prepayment without penalty.

The [Company] has the right to prepay the loan at any time without incurring any prepayment penalties, as long as all accrued interest and fees are paid in full.

Project financing clause with requirement for a reserve account

This version requires a reserve account.

The [Company] agrees to set up a reserve account into which [X]% of the loan proceeds will be deposited. This reserve will be used to cover unforeseen project costs and to ensure the continued funding of the [specific project].

Project financing clause with right to assign debt obligations

This version allows for assignment of debt.

The lender has the right to assign or transfer their debt obligations under this Agreement to a third party, subject to the approval of the [Company], which shall not be unreasonably withheld.

Project financing clause with lender’s right to appoint project manager

This version includes the lender’s right to appoint a project manager.

The lender has the right to appoint a project manager to oversee the completion of the [specific project] and to ensure that it meets the financial and operational requirements of the financing agreement.

Project financing clause with post-project reporting requirements

This version includes post-project reporting requirements.

The [Company] shall submit detailed reports to the lender regarding the financial performance and operational outcomes of the [specific project] for a period of [X] years following the completion of the project.

Project financing clause with automatic interest capitalization

This version includes automatic interest capitalization.

Any unpaid interest on the loan will be automatically capitalized and added to the principal balance of the loan at the end of each [X]-month period until the loan is repaid in full.

This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.

Last updated 18 Mar 2025