What Is An SPV (Special Purpose Vehicle)?

What Is A Special Purpose Vehicle (SPV)?

A special purpose vehicle is a legal entity created for a defined transaction or pool of assets. Instead of holding a project, investment or portfolio inside an operating company, sponsors place it in a separate company with its own balance sheet, bank accounts, contracts and security package. That separation is what allows lenders and investors to focus on the risks and cash flows of that one activity rather than the wider corporate group.

An SPV is not a magic box that removes risk. It is a ringfenced entity with clearly identified assets, liabilities and contracts. When designed properly, creditors know exactly what they have security over, sponsors know how far their support extends and regulators can see who is responsible for what. When it is vague why the SPV exists, who controls it and how cash moves through it, the structure becomes hard to finance and hard to defend.

Core Features Of An SPV

Although the legal form and jurisdiction can differ, most bankable SPVs share a few common traits. The focus is on legal separation, predictable cash flows and governance that matches the size and risk of the activity being housed in the vehicle.

Legal Form And Ownership

  • Incorporated as a company, partnership or similar vehicle under a specific legal system, with its own registration number and constitutional documents.
  • Shareholders are usually the project sponsors, holding companies or joint venture partners rather than individual operational subsidiaries.
  • Shareholder agreements govern voting rights, reserved matters and what happens if one party wants to exit.

Ringfenced Assets And Liabilities

  • Only assets and contracts relevant to the project or transaction sit inside the SPV balance sheet.
  • Liabilities are limited to those incurred by the SPV and any guarantees or support arrangements documented around it.
  • Sponsors may give limited or non recourse support, but that support is documented and priced, not implied.

Governance And Decision Making

  • Directors are appointed with clear fiduciary duties to the SPV, not just to the wider group.
  • Important decisions, such as taking on new debt or granting security, are controlled by board and shareholder approvals.
  • For larger transactions, independent directors or governance checks may be added to protect creditors.

Funding, Cash Flows And Security

  • Equity and debt funding are injected into the SPV, which then enters into project contracts, purchase agreements or loan documents.
  • Cash flow waterfalls and blocked accounts direct incoming cash to operating costs, debt service, reserves and distributions in a defined order.
  • Lenders usually take security over SPV shares and project assets, rather than relying on a whole group corporate guarantee alone.

Common SPV Types And Use Cases

SPVs appear across project finance, real estate, securitisation, trade finance and corporate acquisitions. The label is the same, but the reasons sponsors and lenders use them can differ.

SPV Type Typical Purpose Key Structural Points
Project Finance SPV Holds a single power plant, mine, data center, toll road or similar asset with long term contracts and external debt. Non recourse or limited recourse debt, security over all project assets, detailed cash flow waterfall, reserve accounts and tight covenants.
Securitisation Or Receivables SPV Purchases receivables, leases or other financial assets from an originator and issues notes or borrows against them. True sale of assets, separate bank accounts, servicing and back up servicing arrangements, rated tranches and strict eligibility criteria.
Acquisition SPV Used to acquire shares or assets in a target company, often with acquisition finance at the SPV level. Equity from sponsors plus acquisition debt, security over target shares or assets, post closing mergers or reorganisations may follow.
Real Estate SPV Holds a specific property or property portfolio for development, leasing or sale. Mortgage or charge over the property, rental assignment, construction contracts documented at SPV level, clear equity and preferred return profiles.
Joint Venture SPV Houses a shared project between two or more partners in sectors such as infrastructure, mining, logistics or technology. Shareholder agreement governs voting, deadlock, exit and funding, with clear rules around contributions and distributions.
Holding Or IP SPV Owns intellectual property or strategic shareholdings separate from operating entities. Licensing or cost sharing arrangements, security over shares or IP, tax and transfer pricing carefully managed to meet regulatory expectations.

Example SPV Structures In Practice

The examples below are simplified. The goal is to show how sponsors, lenders and investors use SPVs to frame risk and returns around a specific project or asset pool.

Utility Scale Solar Project SPV
A sponsor incorporates an SPV to build and operate a 100 MW solar park. The SPV signs the land lease, engineering and construction contracts and a long term power purchase agreement. Equity and senior project finance loans are injected into the SPV. Lenders take security over the shares, assets and accounts of the SPV and rely on project cash flows for repayment, supported by limited sponsor guarantees during construction.
Trade Receivables SPV
An exporter sells eligible receivables on a revolving basis into a bankruptcy remote SPV. The SPV funds those purchases using a combination of senior notes and a junior tranche provided by the sponsor. Cash from buyers is paid into SPV controlled accounts and applied according to a waterfall. This separates receivables performance from the broader corporate credit of the exporter.
Leveraged Buyout SPV
A private buyer forms an acquisition SPV to purchase a target company. Equity is committed into the SPV, which then raises senior and mezzanine loans. The SPV acquires the target shares and grants security over them to lenders. Post closing, cash from the target is upstreamed to the SPV to service debt, within the limits set by financing and corporate law.
Cross Border Joint Venture SPV
Two industrial groups from different countries create an SPV in a neutral jurisdiction to pursue a logistics project. Each holds 50 percent of the equity. The SPV signs concession agreements, lease contracts and financing documents. The joint venture agreement sets out capital contribution obligations, board composition, veto rights and what happens on deadlock or breach.

Misconceptions And Red Flags Around SPVs

SPVs earned a bad reputation in past corporate scandals where they were used to disguise losses or move liabilities off balance sheet. That history leads some people to see every SPV as a red flag, and others to assume that anything placed in an SPV is automatically hidden from view. Both reactions miss how modern accounting, regulatory rules and lender requirements treat these structures.

Common Misconceptions
  • Belief that an SPV always sits off balance sheet and removes the assets and debt from group accounts.
  • Assumption that regulators and auditors will accept any risk transfer simply because a separate entity exists.
  • Idea that an SPV can replace proper disclosure, credit work or governance at group level.
Practical Red Flags
  • No clear written reason why the SPV exists and what assets or contracts it is meant to hold.
  • Commingling of SPV cash with sponsor or group cash, weak or absent bank mandates and account controls.
  • Vague ownership structure, missing shareholder agreements or side deals that conflict with signed documents.
  • Material obligations housed in an SPV with no audited accounts, no board minutes and poor record keeping.

SPVs: Common Questions

Is an SPV always off balance sheet for the sponsor? ›
No. Consolidation rules under accounting standards look at control, risks and rewards, not only legal form. If a sponsor controls the SPV and bears most of the economic exposure, the SPV will usually be consolidated into group accounts, even if it is a separate legal entity.
Does setting up an SPV remove risk for the sponsors? ›
An SPV redistributes risk rather than making it disappear. Lenders may rely mainly on SPV assets and cash flows, but they often require guarantees, support letters or completion undertakings from sponsors. Shareholders still face equity risk and reputational risk if the SPV fails.
Where should I incorporate an SPV? ›
Jurisdiction choice depends on project location, investor and lender preferences, tax treaties, dispute resolution and substance requirements. Sponsors often choose well tested corporate law systems with predictable courts and service providers who understand cross border finance. This is a legal and tax question that should be addressed early.
When does a simple SPV become a regulated fund or security? ›
Once an SPV starts raising money from multiple outside investors, offering interests to the public or marketing itself as an investment product, securities and fund rules can apply. At that point, sponsors should expect regulatory filings, offering documents and possibly a licensed manager or placement agent.

How Financely Approaches SPV Structuring And Capital Raising

Financely works with sponsors who view SPVs as part of a disciplined financing strategy rather than a cosmetic bolt on. That means defining the purpose of the vehicle, mapping cash flows, setting governance that lenders and investors can respect and building a security package that matches the risk profile of the project or transaction.

Our role is to help clients scope the structure, coordinate legal, tax and technical advisers, prepare financial models and information packs and connect the SPV with suitable lenders and capital providers through regulated partners. Mandates are handled on a best efforts basis, with clear communication around fees, timelines, conditions and the limits of any advisory engagement.

Discuss Your SPV And Capital Structure

If you are planning a project, acquisition, securitisation or joint venture and need to house it in an SPV with a bankable structure, share your outline and documentation pack with our team.

Submit Your Transaction

Disclaimer: This page is for general information only and does not constitute legal, tax, accounting or investment advice. Financely acts as advisor and arranger through regulated partners and is not a bank. Any SPV, fund, financing or capital raising structure is subject to underwriting, KYC, AML, sanctions screening, legal review, documentation, perfected security and approvals by relevant stakeholders. No public offer or solicitation is made on this page.

Get Started With Us

Submit Your Deal & Receive a Proposal Within 1-3 Working Days

Submit your deal using our secure intake form, and receive a quote within 1-3 business days. Existing clients can connect with their relationship manager through our secure web portal.


All submissions are promptly reviewed, and all communications are conducted through the intake form or the client portal for a seamless and secure process.

Express Application Submit Your Deal
Request a Proposal
Request a Proposal / Submit a Deal

Thank you for considering working with us. A nominal fee of US$500 is required upon completion of each form. This fee covers the time and effort we invest in reviewing your submission and crafting a thorough proposal. We receive numerous inquiries and prioritize those that carry this fee, ensuring serious applicants receive prompt attention.

Trade Finance

Tap into solutions like letters of credit, bank guarantees, and payment facilitation. We address the challenge of global transaction risk through structured strategies that foster cross-border growth. Complete the form to unlock streamlined funding aligned with your commercial objectives.

Submit a Request

Project Finance

Access non-recourse funding for infrastructure, renewable energy, or other capital-intensive ventures. We mitigate capital constraints by isolating project assets and focusing on risk management. Provide your details to receive a structure that drives growth and maximizes returns.

Submit a Request

Acquisitions

Secure financing for business or real estate acquisitions. We ease transaction hurdles by reviewing cash flow, synergy opportunities, and exit plans. Complete the form for a customized proposal that supports your strategic investment objectives.

Submit a Request

For Banks

Financely assists banks facing Basel III pressures by distributing trade finance deals and providing collateral for letters of credit. We reduce capital burdens while preserving client relationships and fostering service expansion. Submit your request to optimize your trade finance offerings.

Submit a Request

Once we receive your submission, our team will review your information to determine feasibility. If eligible, you will receive a proposal or term sheet within 1–3 business days. Visit our FAQ and Procedure pages for more information.

Disclaimer: Financely provides financing based on due diligence and feasibility. Approval is not guaranteed, and past performance does not predict future outcomes. All terms are subject to review. Financely primarily assists with structuring and distribution. Qualified parties carry out the project if the client approves the proposal.

Still Have Questions? Schedule a Consultation

If you still have questions after visiting our FAQ and Procedure pages, we invite you to book a paid consultation for personalized guidance. A $250 USD fee applies per session.