> For the complete documentation index, see [llms.txt](https://help.modelreef.io/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://help.modelreef.io/use-cases/capital-projects-and-infrastructure/funding-and-drawdown-structures.md).

# Funding & Drawdown Structures

This use case explains how to model funding structures, drawdowns and debt service for capital projects and infrastructure in Model Reef.

You will:

* Represent equity, debt and hybrid funding instruments.
* Build drawdown profiles linked to capex and project cashflows.
* Model interest during construction, term debt and refinancing.
* Connect funding structures to project and group level cashflows and valuation.

Model Reef is not a debt administration or covenant monitoring system. It provides planning level funding structures suitable for project and portfolio modelling.

## When to use this pattern

Use this pattern when:

* Projects require significant external funding.
* Drawdowns and repayments are closely tied to capex and project milestones.
* Interest during construction is material.
* You want to test alternative funding mixes and structures.

It builds on:

* Capex Program Modelling
* Multi Phase Project Cash Flows
* Build a Debt Schedule and Covenants Model
* Build a Capital Structure Model

## Architecture overview

{% stepper %}
{% step %}

### Capital structure

* Equity, shareholder loans, senior and subordinated debt.
* Project level versus group level funding.
  {% endstep %}

{% step %}

### Drawdown logic

* Facilities sized relative to capex and contingencies.
* Drawdowns linked to capex timing or percentage of completion.
* Interest during construction and capitalisation where applicable.
  {% endstep %}

{% step %}

### Debt service

* Amortising or bullet repayment profiles.
* Interest only periods and step ups.
* Covenant and coverage ratio calculations where you choose to include them.
  {% endstep %}

{% step %}

### Integration

* Cashflows and balances flowing into project and group statements.
* Inputs to valuation and capital structure analysis.
  {% endstep %}
  {% endstepper %}

***

{% stepper %}
{% step %}

### Define funding instruments and entities

Start by listing the funding instruments you want to model, for example:

* Equity injections.
* Shareholder loans.
* Senior term loan.
* Construction facility.
* Revolving credit facility.

Create Liability variables for each debt instrument and Equity variables for equity injections. Decide whether:

* Funding sits at project branch level, or
* Funding is raised at group or holding entity level and then allocated to projects.

Reflect this structure in the branch tree so that debt and equity flows roll up correctly.
{% endstep %}

{% step %}

### Size facilities and equity based on capex and cashflows

Use capex and project cashflow outputs to determine:

* Total funding requirement including contingency and working capital.
* Minimum equity contribution required.
* Maximum facility sizes for construction and term debt.

Create Data Library drivers for:

* Facility limits per instrument.
* Target gearing or leverage ratios.
* Equity percentage or absolute equity amounts.

These drivers will feed into drawdown logic and help you test alternative structures.
{% endstep %}

{% step %}

### Build drawdown rules and timing

For each debt facility, define drawdown rules such as:

* Drawdowns equal to a fixed percentage of capex each period.
* Drawdowns up to a maximum facility limit.
* Use of equity first, then debt, or vice versa where applicable.
* Conditions such as no further drawdowns after commissioning.

Implement drawdowns using Liability variables with:

* Positive cash inflows when funds are drawn.
* Increases in loan balances.
* Conditional cessation of drawdowns once limits or dates are reached.

For equity, use Equity variables to represent injections at agreed milestones or in line with funding ratios.
{% endstep %}

{% step %}

### Model interest during construction and capitalisation

For facilities used during construction, specify:

* Interest rates and any margins over reference rates.
* Whether interest is paid in cash or capitalised during construction.
* When interest switches from capitalised to cash paid, for example at commissioning.

Model Reef will compute interest based on opening balances and timing settings. To capitalise interest, either:

* Add interest to the loan balance rather than treating it as an immediate cash payment, or
* Use a separate Asset variable to represent capitalised interest if you want to track it explicitly.

This ensures that:

* Construction period interest is included in funding requirements.
* Balance Sheet and P\&L treatment is consistent with your policy.
  {% endstep %}

{% step %}

### Specify debt service, repayments and refinancing

For each facility, define repayment behaviour:

* Amortising schedules with fixed or sculpted instalments.
* Interest only periods followed by amortisation.
* Bullet repayments at maturity.
* Refinancing events where one facility is repaid and replaced by another.

Implement this via Liability variables with:

* Scheduled principal repayments per period.
* Interest payments based on outstanding balance.
* New drawdowns for refinancing facilities where applicable.

Cashflow Statement and Cash Waterfall will then show:

* Debt inflows and outflows.
* Interest paid as operating cashflow.
* Net debt movement per period.
  {% endstep %}

{% step %}

### Integrate funding structures with project and group views

At project level, use funding variables together with capex and operational cashflows to see:

* Net cash positions and funding gaps.
* Peak debt and interest coverage patterns.
* Project level equity returns where you choose to compute them.

At group level, consolidate funding flows and balances across projects to analyse:

* Total leverage.
* Debt service capacity.
* Headroom under facility limits.
* Capital structure and valuation.

You can also connect this pattern to debt covenant and coverage ratio calculations if required.
{% endstep %}

{% step %}

### Use scenarios for alternative funding mixes and terms

Clone the base model into scenario models to explore:

* Different equity or debt proportions.
* Alternative facility sizes and tenors.
* Changes in interest rates and margins.
* Different drawdown rules or sequences.
* Alternative refinancing strategies.

In each scenario, adjust:

* Facility limits and equity contributions.
* Interest rates and capitalisation rules.
* Repayment and refinancing assumptions.
* Project or portfolio cashflow assumptions for consistency.

Compare scenarios using:

* Peak and average leverage.
* Debt service and coverage ratios where defined.
* Equity and project level IRRs where you choose to calculate them.
* Valuation metrics and risk indicators.
  {% endstep %}
  {% endstepper %}

## Check your work

{% hint style="info" %}

* Funding structures reflect term sheets or internal policies.
* Drawdowns occur only when cash is needed and within facility limits.
* Interest and repayment patterns match expectations.
* Scenario results are understandable for both project finance and corporate finance stakeholders.
  {% endhint %}

## Troubleshooting

<details>

<summary>Debt balances go negative or exceed facility limits</summary>

Check drawdown and repayment logic and add guardrails so that drawdowns cease when limits are reached.

</details>

<details>

<summary>Interest expense appears inconsistent</summary>

Verify interest rate settings, compounding assumptions and whether interest is being capitalised or paid in cash as intended.

</details>

<details>

<summary>Complexity grows quickly with many facilities</summary>

Group similar facilities into aggregate instruments for planning purposes and reserve detailed modelling for material facilities.

</details>

## Related guides

* [Build a Bottom Up Forecast](/how-tos/core-modelling/build-a-bottom-up-forecast.md)
* [Build a Budget vs Actuals Model](/how-tos/scenarios-and-planning/build-a-budget-vs-actuals-model.md)
* [Parent/Child Behaviour](/help/building-your-model/parent-child-behaviour.md)
* [Formula Syntax](/syntax/formula-syntax.md)


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