What is limited recourse financing?

Limited recourse financing is a type of financing where the lender's ability to recover its loan is limited to a specific source of repayment, such as project cash flows or specific assets. This means that the lender has limited recourse to the borrower's other assets in the event of default, which helps to reduce the lender's overall risk exposure. Limited recourse financing is commonly used in project finance, where lenders are primarily interested in the project's ability to generate sufficient cash flows to repay the loan.