Project-based lending is a method of cash flow lending. It is based on the future or expected cash flows of a project or activity that is to be financed.
Collateral is the secondary consideration, primary consideration is the viability of the project itself.
Advantages: The repayment is based on the future flow of the project, start-up projects may qualify, best suited for development.
Disadvantages: Small risk of diversion of loan proceeds by the borrowers. Has elements of vulnerability variant on project risks, it also may require some analysis on the viability of the project, to ensure project success.