10.1.1  The concept of Corporate Financing

Corporate entities typically use a range of financing means to fund their daily business needs across their corporate group. They will have credit facility arrangements with their relationship banks and may also raise finance through bond issues (public or private). They may also have multiple operating assets already generating revenue. If a new investment opportunity arises (such as a PPP Project), some corporate entities may prefer to put in place additional finance on a corporate basis instead of going down an investment-specific route (such as project finance). The strength of the corporate entity's balance sheet (potentially alongside consortium partners, parent companies or key subcontractor(s)) will be key to its ability to do this, as generally the lenders or investors involved in the new corporate financing will have recourse to the whole corporate entity, not just the specific asset being financed. Depending on the size of the corporate entity relative to the size of the investment in question, the lenders or investors may in fact be less concerned with the asset itself, and more focused on the performance of the corporate entity as a whole.

Some corporates may not even need to enter into specific additional financing arrangements for particular investments as their balance sheets are so strong that they have sufficient financial reserves to finance the investment in question.

The funding of investments in this way is called corporate financing and is also known as "on balance sheet" financing.