Special-Purpose Entity Law and Legal Definition

Special purpose entity is a business established to develop, own, and operate a large, complex project. This is usually done in order to limit the number of creditors who claim against the project. Special purpose entity is also known as a special-purpose vehicle. A special purpose entity is commonly abbreviated as SPE. A special-purpose entity provides extra protection for project lenders, since there will be fewer competing claims for that money and the entity will not probably be forced into bankruptcy. Project lenders are normally paid only out of the money generated by the entity's business. A special-purpose entity sometimes issue securities instead of just receiving a direct loan.