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PDP financing allows buyers to manage cash flow by borrowing funds to cover pre-delivery payments instead of using their own capital. This is especially useful in capital-intensive industries where upfront costs are substantial and delivery timelines are long.
PDP financing is typically provided by banks, export credit agencies or specialized financial institutions. These lenders structure the financing to align with the payment schedule and may secure the loan with collateral or guarantees.
PDP financing is usually structured as a short- to medium-term loan, with disbursements made in tranches aligned with the manufacturer’s payment schedule. Repayment may occur upon delivery of the asset or be refinanced into a long-term loan.
Key risks include manufacturer delays, buyer default or changes in market conditions. Lenders mitigate these risks through legal protections, insurance and sometimes by taking security interests in the asset under construction.
