The funding unit will not replace commercial lenders and the European Investment Bank (EIB) who are expected to continue to provide the majority of the finance. Instead, the funding unit will provide loans alongside these parties. The Treasury has not however ruled out acting as sole lender on a PFI transaction in circumstances where no commercial lending is available or is only available on unacceptable terms.

The Treasury will lend on commercial terms, receiving interest alongside the banks with project sponsors hedging a floating rate of interest on the swap market. The Treasury will share in the security and will rank pari passu with commercial lenders both pre- and post-enforcement. Project risk accepted by the commercial lenders will equally be accepted by the Treasury.

The Treasury will have full unencumbered syndication and sale rights in common with other lenders. The intervention will be temporary, with the Treasury intending to transfer the loans to the private sector when the credit markets recover. The refinancing of any Treasury loan by the sponsors will be treated in the same way as any other refinancing within the standard project documentation.

Eligibility for funding will depend on the stage of procurement reached. Those PFI projects which have issued a notice in the Official Journal of the European Union (OJEU) by 3 March 2009 will be eligible for finance. Projects going to market shortly after this date will also qualify provided that they meet the usual value for money and affordability criteria and subject to the projects having received Treasury approval prior to the issue of the OJEU notice.