when a company defaults on a loan recourse financing gives lenders full claim to shareholders assets or cash flow in contrast project financing designates the project company as a limited liability spv the lenders recourse is thus limited primarily or entirely to the project s assets including completion and performance guarantees and bonds in case the project company defaults 
a key issue in nonrecourse financing is whether circumstances may arise in which the lenders have recourse to some or all of the shareholders assets a deliberate breach on the part of the shareholders may give the lender recourse to assets applicable law may restrict the extent to which shareholder liability may be limited for example liability for personal injury or death is typically not subject to elimination nonrecourse debt is characterized by high capital expenditures capex long loan periods and uncertain revenue streams underwriting these loans requires financial modeling skills and sound knowledge of the underlying technical domain to preempt deficiency balances loan to value ltv ratios are usually limited to 60 in nonrecourse loans lenders impose higher credit standards on borrowers to minimize the chance of default nonrecourse loans on account of their greater risk carry higher interest rates than recourse loans recourse loans vs nonrecourse loansif two people are looking to purchase large assets such as a home and one receives a recourse loan and the other a nonrecourse loan the actions that the financial institution can take against each borrower are different in both cases the homes may be used as collateral meaning they can be seized should either borrower default to recoup costs when the borrowers default the financial institutions can attempt to sell the homes and use the sale price to pay down the associated debt if the properties sell for less than the amount owed the financial institution can pursue only the debtor with the recourse loan the debtor with the nonrecourse loan cannot be pursued for any additional payment beyond the seizure of the asset project finance vs corporate financeproject and corporate finance are very important concepts in the world of financing both of these funding methods rely on debt and equity to help businesses reach their financing goals having said that they are very distinct project finance can be very capital intensive and risky and relies on the project s cash flow for repayment in the future corporate finance on the other hand is focused on boosting shareholder value through various strategies like the investment of capital and taxation unlike project financing shareholders receive an ownership stake in the company with corporate financing some of the key features of corporate financing include 