SPV financing: how to fund your business or project with a special purpose vehicle
SPV financing (special purpose vehicle), also known as using a project company, is a widely used technique for funding large investments (real estate, energy, industry, infrastructure). Its main advantage: it allows high leverage through debt while ring-fencing the project's risks and cash flows. This guide explains how an SPV works, its advantages, its costs and its practical use cases.
By Collaboration Capital · Updated
What is an SPV (special purpose vehicle)?
An SPV (special purpose vehicle) is a company set up specifically to hold a given project or asset. In France, it is often a dedicated SAS (société par actions simplifiée, a simplified joint-stock company), whose corporate purpose is limited to the project being financed.
👉 In French, it is usually called a société de projet (project company).
The funder (bank, fund, investors) finances the project through the SPV, not the operating company as a whole.
Why use SPV financing for a project?
Ring-fence risks and security
The SPV is a financial “clean sheet”:
- the project's assets are held in the SPV
- the security is attached to the SPV
- the debt is carried by the SPV
👉 If the parent company runs into difficulty, the project's assets remain protected within the SPV. 👉 In the event of default, funders can have direct recourse to the financed assets. This is the foundation of project finance.
Raise more debt (higher leverage)
Because the risk is ring-fenced, banks generally accept:
- up to 80% to 90% debt financing
- an equity contribution of only 10% to 20%
That is much higher than in conventional corporate lending.
Ring-fence the project's cash flows
The revenue generated by the project stays within the SPV:
- rents
- energy sales
- operating revenue
- tolls, royalties, etc.
The funder therefore assesses: 👉 the project's profitability 👉 the SPV's capacity to repay, rather than that of the whole company.
Protect the parent company
If the project fails:
- the impact is limited to the SPV
- the operating company is shielded
A possible insolvency of the project does not “contaminate” the main business. A further advantage: the security stays within the SPV (no pledge over the holding company or the parent company).
Simplify how the financing is managed
All funders come in at SPV level:
- a single financing agreement
- the same terms for all
- a clear structure
This spares the parent company from managing several separate debts.
Improve financial transparency
When the company borrows directly:
- cash flows are mixed into the overall balance sheet
- performance is hard to track project by project
With an SPV:
- all cash flows are dedicated
- profitability is transparent
- the project's performance is easy to read
SPV financing: amount, cost and timing
An SPV generally makes sense for financings 👉 above EUR 1 million. Why?
- legal and structuring fees
- running costs
- administrative complexity
For smaller amounts, other solutions are often better suited. On cost, in practice: around EUR 15,000 at minimum, varying with complexity (legal fees plus structuring). On timing, incorporating the company is quick (a few days); most of the time goes into structuring the financing, the contracts and the exit scenarios. 👉 In practice: typically 1 to 3 weeks in simple cases, which every project should confirm on its own facts.
Sectors where SPV financing is most widely used
SPVs are particularly well suited to capex-heavy projects:
Practical examples of SPV financing
1. A property SPV for an operating business
A company runs a restaurant or a spa. Structure:
- SPV → buys the property
- operating company → runs the business
- a lease between the two
Advantages:
- easier access to financing
- clear security
- separation between operations and assets
2. An SPV to finance equipment or assets
The SPV can buy:
- aircraft
- vehicles
- industrial machinery
- Infrastructure
And then lease them to the parent company. 👉 A very common model in aviation and transport.
3. SPVs in renewable energy
Example: a solar farm. The SPV:
- acquires the land
- finances the installation
- carries the debt
- signs the energy contracts
The parent company:
- builds
- operates
- maintains
One solar farm = one SPV.
How an SPV works day to day
The SPV can:
- have no employees
- delegate its management to the parent company
- sign maintenance contracts
- sign operating contracts
The parent company acts as the SPV's service provider.
Advantages
- high debt leverage
- ring-fenced risk
- protection of the parent company
- financial transparency
- easier access to financing
- simpler multi-funder arrangements
Disadvantages
- legal costs
- contractual rigidity
- tightly framed governance
- reporting obligations
Typical SPV financing structure
Conclusion: when should you use SPV financing?
SPV financing is ideal when:
- the project is large (> EUR 1m)
- the asset is identifiable
- the cash flows are dedicated
- the company wants to ring-fence the risk
- high debt leverage is sought
Today, SPV financing is standard practice in project finance and a key tool for developing capital-intensive projects.
Preparing an SPV financing file: the checklist
An SPV lender analyses the project, not the company: the file must therefore demonstrate on its own that the project's cash flows will repay the debt. Before approaching a bank or a fund, check that you have the following.
- A business plan specific to the project, with revenue assumptions backed by signed contracts or firm commitments (lease, power purchase agreement, operating contract).
- A financing plan that clearly separates the equity contribution, senior debt and any additional financing; our page on senior debt, mezzanine and convertible bonds helps position each tranche.
- A draft agreement between the SPV and the parent company (lease, management services, maintenance), showing that relations between the two entities are properly framed.
- Downside scenarios: what happens if the project starts late or revenues fall short of forecasts? Lenders examine these cases using the banking ratios they apply to any request.
If the project consists of buying a company rather than holding an asset, the logic is similar but the tool differs: this is then an acquisition holding company, whose specific features are presented on our page SPV, acquisition holding company and “fiducie” (French trust).
SPV financing: frequently asked questions
Is an SPV the same as a project company?
Yes. SPV (special purpose vehicle) is the English term; in French it is called a société de projet, or project company. It is a dedicated company, often a French SAS, whose purpose is limited to the project being financed.
How much debt can an SPV raise?
Because the risk is ring-fenced, banks generally accept debt financing of up to 80% to 90%, with an equity contribution of only 10% to 20% — far more than in conventional corporate lending. The actual level depends on each project and each lender.
From what amount does an SPV make sense?
Generally above around EUR 1 million, because legal fees, running costs and administrative complexity make the structure less suited to smaller financings.
How much does it cost and how long does it take to set up an SPV?
Around EUR 15,000 at minimum (varying with complexity), and typically one to three weeks in simple cases — most of the time goes into structuring the financing, not incorporating the company.
Sources and references
- Code général des impôts, art. 223 A — tax consolidation regime — Légifrance
- Summary tables of the legal structures for a business takeover — Bpifrance Création
- Market-wide agreement on business credit mediation — Banque de France
Content written and reviewed by the Collaboration Capital team. These references are provided for information only and do not replace legal or tax advice tailored to your situation.
Structure the financing of your project
SPV set-up, sourcing debt and investors, structuring: Collaboration Capital supports you in financing your capital-intensive projects.
Discuss my financingUn premier échange de 30 minutes avec un associé pour cadrer votre projet de cession, d'acquisition ou de financement — sans engagement.
Reply within 24 business hours
Confidentiality guaranteed — NDA on request
IOBSP broker registered with ORIAS under no. 25000696