Production payment financing

Production payment financing

A method of nonrecourse asset-based financing in which a specified percentage of revenue realized from the sale of the project's output is used to pay debt service.

Production Payment Financing

An unsecured debt or line of credit for a business project in which a certain percentage of proceeds from the project's sales are devoted to debt service. For example, if a business borrows $100,000 to expand its widget production, a percentage of the revenue from the sales of the extra widgets is given to the bank until the debt is settled. Because there is no asset securing the debt when it is borrowed, the lender has no recourse in case of default.
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