The debt decision library
Financing decisions
Compare alternatives with common assumptions, explicit tradeoffs, and traceable cash flows.
A financing comparison is useful only when both proposals solve the same funding problem on the same calendar. Normalize the transaction facts while preserving each lender’s actual terms. Compare usable cash, required equity, payments, future funding and repayment obligations before deciding which tradeoffs matter. This path deliberately moves beyond the largest commitment or lowest quoted rate, without assuming that a cheaper modeled outcome is available or preferable for every sponsor.
Which assumptions should be held constant?
Use the same property budget, operating scenario and intended hold period where the question permits. Keep lender-specific cash-flow adjustments, funding conditions, fees and payment conventions distinct. Otherwise the comparison can erase the very differences the sponsor needs to evaluate.
Can a larger commitment require more equity at closing?
Yes, when part of that commitment remains undrawn or more of the initial advance funds fees and restricted cash. Reconcile commitment to funded balance and usable proceeds before comparing the sponsor’s immediate contribution.
A path through this collection
Compare funding mechanics first
Build a bridge from each stated commitment to cash available for transaction uses. Identify future advances and reserve restrictions separately, and reconcile each resulting closing shortfall.
Compare the operating and repayment paths
Apply the same property interruption and improvement plan to both structures. Track debt service, reserve balances and principal at exit rather than comparing only the first payment.
Write a conditional decision
Explain which proposal satisfies the sponsor’s constraints and what remains unresolved. Include execution certainty, guarantees and flexibility as documented considerations; do not disguise qualitative differences inside an unsupported numerical score.
What you should have when you finish
- A common property scenario with lender-specific assumptions preserved.
- Separate comparisons of usable closing cash, ongoing payments and exit obligations.
- A decision record identifying tradeoffs, unanswered questions and conditions that could change the choice.
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