Case Example
CS0002
V1.0 Apr2015 AV
Two External Loans (Initial & Construction) with Equity funding Balance
Scenario: Land owner to receive $20m from one line of debt with construction funded from another facility.
Developer to finance the balance with Equity and both Loans paid at project completion.
Step 1
Define and Set Parameters within the Financing section of Preferences. You will specify
specific terms such as interest rates/ facility limits $/ fees etc within the Financing section
of the Input worksheet.
Global
Select the Advanced financing level as there are multiple sources of funds
Select the appropriate Interest Rate Conversion (i.e.: Nominal or Effective)
Select the most appropriate ratio measure; there are 11 to choose from. For example % of
Net Cash Flow, for cash outlay, OR % Project & Finance cost, for Total Costs, but you can
also measure against Revenue or Presales.
The selection will be used to calculate the Returns on Funds Invested and will be displayed
within the Summary of Project Returns.
Page 1 of 7
Equity
Will set up the Developer’s contribution.
As there are 2 external loans and no Overdraft facility – equity will be used to fund the
balance whenever there is a shortfall.
The Injection Method will determine how the Funding drawdowns will be made, in this
instance select Progressively injected when required - to cover the shortfall.
Select the appropriate interest payment method (i.e. Simple or Compounded) if there will
be an interest charge for any equity contributions made by the Developer. If no interest
charge, this is irrelevant and can be left at the default setting.
A Ratio measure can be selected for each source of funds (i.e. Equity or Debt). There are 13
to choose from. The selection will be used to calculate the Returns on Funds Invested and
will also be displayed within the Summary of Project Returns.
Select the appropriate repayment method (i.e. Project End or When Available) to
nominate when equity is repaid by the project; for instances where there maybe excess
cash from pre-sale or pre-commitments. There are 3 to choose from.
Tick the box so that Equity repays any Outstanding Debt at Project End.
Page 2 of 7
Loan 1
Will set be used to set up the initial drawdown and funding of the $20m at project
commencement.
Set Loan Type to Debt (Note: Any of the 4 loans can be used as a source of Equity funding)
Loan Term unless there is a specific start and/or maturity date this can be left checked
(default).
Select Fixed Limit. The amount, $20m, will be specified in the Financing section of the
Input worksheet, this just defines the basis of how this facility limit will be calculated. There
are 11 options to choose from.
Loan Drawdown should be set to Drawn down in total at loan commencement in line with
the terms agreed with the bank and this case example.
Select the appropriate interest payment method (i.e. Simple or Compounded).
Select the most appropriate ratio measure for this facility; we have selected % of Land
Purchase Price for this case example.
Indicate how the loan will be repaid at Maturity. You have the option to roll it over to a
new or existing loan or repaid by Equity. In this instance, all external loans will be paid at
project completion so Refinanced by Equity has been selected for this case example.
Page 3 of 7
Loan 2
Will set be used to set up the construction loan facility. In the case example, this facility will
be restricted to fund only Construction progress claims. All other costs will be funded by
Equity.
Set Loan Type to Debt (Note: Any of the 4 loans can be used as a source of Equity funding)
Loan Term unless there is a specific start and/or maturity date this can be left checked
(default).
Set the facility Limit to % of Construction Costs. The percentage, 100%, will be specified in
the Financing section of the Input worksheet, this just defines the basis of how this facility
limit will be calculated. There are 11 options to choose from.
Loan Drawdown should be set to Progressively – Limited to cumulative facility this will
ensure that the loan only funds the cost specified within the Construction table of the Input
section (including Construction Contingency). If Progressively drawn down when required
is selected funding will include all costs (Construction/ Statutory/ Misc. etc.) until the
facility maximum is reached.
Select the appropriate interest payment method (i.e. Simple or Compounded).
Select the most appropriate ratio measure for this facility; we have selected % of
Construction Costs for this restricted facility
Indicate how the loan will be repaid at Maturity. You have the option to roll it over to a
new or existing loan or repaid by Equity. In this instance, all external loans will be paid at
project completion by Equity so Refinanced by Equity has been selected for this case
example.
Loan 3
NOT USED
Page 4 of 7
Loan 4
Is the default loan for any overdraft facilities, debt or equity. In this case example, the
developer has agreed to finance any shortfall with Equity.
Setting the facility limit to Set Fixed Limit (equity acts as overdraft facility) will redirect any
shortfall to the Developer’s equity
Step 2 Set up Funding Arrangements in the Input Sheet
Equity
Equity acting as the overdraft facility, will drawdown automatically when there is a shortfall
so nothing further is required.
Specify the Interest Rate to be charged on Equity (if required)
Loan 1
Specify the specific terms for this facility here, in this case example the initial loan
Description: Loan 1: Initial $20m
Fixed Limit Amount: $20m
Term: (not required - default “auto” has been left selected otherwise it would be displayed
as “manual”)
Specify the Interest Rate to be charged and any fee(s) that have been agreed with the
Financier.
Loan 2
Specify the specific terms for this facility here, in this case example the Construction Loan
Description: Loan 2: Construction
Facility Limit %: 100% of Construction Costs to be funded
Term: (not required as the default “auto” has been left selected)
Specify the Interest Rate to be charged and any fee(s) that have been agreed with the
Financier.
Page 5 of 7
Page 6 of 7
The Summary Report provides a meaningful overview of all sources of funds
Page 7 of 7