Project finance is enjoying renewed attention as a financing technique in which the lenders look primarily to the cash-flow of a project as the main source of loan reimbursement, whereas assets represent only collateral. Owing to the general misunderstanding of the terms used in respect of project finance, the purpose of the paper will be to provide clear definitions, drawing attention to different project finance transactions that can be placed on a continuum, with recourse to project sponsors ranging from non-recourse to almost complete recourse. Several characteristics of project finance will also be addressed. KEY WORDS: • financial economics • structured finance • project finance • non-recourse and limited recourse debt • special purpose vehicle • highly leveraged capital structure