Sources and Uses Model Template
Executive Summary
Key Takeaways
- ✓ The template separates every source and use into its own labelled, formula-driven cell, with the total reconciliation calculated rather than entered, so no hardcoded balancing plug is required.
- ✓ Equity is structured as the calculated residual once debt capacity is determined, not a fixed input the statement is forced to balance around.
- ✓ Interest during construction is structured to reference the drawdown schedule directly, resolving the circularity between total uses and debt sizing through the same controlled iterative approach used elsewhere in the model.
- ✓ This is a structural template for how to organize the statement, not a source of specific cost or financing assumptions — every figure must be sourced and justified for the specific transaction.
- ✓ Using this structure directly supports the checks in the Project Finance Model Build Checklist, since every line is already isolated and traceable back to its underlying calculation.
Purpose¶
This template sets out how a project finance sources and uses statement should be structured as a standalone, auditable schedule, following the build methodology in Sources and Uses Modelling. It is a structural template — it does not provide specific cost or financing assumptions, which must be sourced and justified for each transaction.
Template Structure¶
Section 1 — Sources
| Source | Value | Notes |
|---|---|---|
| Senior debt | = calculated (debt sculpting output) |
Sized against minimum DSCR/LLCR; see Debt Sculpting Mechanics |
| Subordinated / mezzanine debt (if applicable) | [input or calculated] | Sequenced per Drawdown and Funding Mechanics |
| Grants / subsidies (if applicable) | [input] | [source and conditions] |
| Sponsor equity | = Total Uses − Total Debt Sources − Grants |
Calculated residual, not a fixed input |
| Total Sources | = SUM(above) |
Must equal Total Uses by formula |
Section 2 — Uses
| Use | Value | Notes |
|---|---|---|
| Construction / EPC cost | [input] | From the construction budget |
| Interest during construction (IDC) | = calculated (from drawdown schedule) |
See Interest During Construction; resolves circularly with Total Uses |
| Financing and advisory fees | [input] | Typically a percentage of debt quantum plus fixed advisory costs |
| Construction contingency | [input] | See Construction Contingency; tracked as a distinct, triggered reserve, not folded into base cost |
| Initial reserve account funding (if funded upfront) | [input] | See Reserve Accounts in Project Finance Models |
| Total Uses | = SUM(above) |
Must equal Total Sources by formula |
Section 3 — Reconciliation
Balance Check = Total Sources − Total Uses
This cell should always equal zero, calculated as a formula check, never forced to zero with a manual adjustment. A non-zero balance check indicates a genuine structural error elsewhere in the statement — most commonly an incomplete uses list or a static IDC estimate — and should be investigated, not overridden.
Section 4 — Gearing Summary
| Metric | Value |
|---|---|
| Debt-to-total gearing | = Total Debt Sources / Total Sources |
| Debt-to-equity gearing | = Total Debt Sources / Sponsor Equity |
See Gearing Ratio for the distinction between the two expressions.
How to Use This Template¶
Populate the uses side first, from the underlying construction budget, fee schedule, contingency assumption, and reserve funding requirement, with IDC referencing the drawdown schedule directly. Size senior (and, where applicable, subordinated) debt through the debt sculpting calculation against the resulting total uses figure, then let sponsor equity calculate as the residual. Resolve the resulting circularity (IDC depends on debt drawn, which depends on total uses, which includes IDC) through a controlled iterative calculation, documented explicitly in the model's assumptions log, consistent with Sources and Uses Modelling.
This structure directly supports the checks in the Project Finance Model Build Checklist, particularly the requirement that the statement balance through formula alone with no hardcoded plug.
Common Pitfalls¶
Entering a hardcoded balancing figure on either side to force Total Sources to equal Total Uses, rather than letting every line calculate independently, defeats the purpose of this structure and masks whatever real error caused the imbalance.
Fixing equity as an input before debt sizing converges, rather than calculating it as the residual, which prevents the statement from correctly responding to a change in debt capacity or total uses.
Estimating IDC as a static lump sum rather than referencing the drawdown schedule, which prevents the funding requirement from responding correctly to a change in the construction schedule or interest rate — see Interest During Construction.
Folding contingency into the base construction cost line, rather than tracking it separately, which removes the ability to represent a cost overrun stress scenario distinctly from the base case.
Continue Reading¶
Related Pillars¶
Related Technical Guides¶
Related Glossary¶
Related Checklists¶
Related Resources¶
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Frequently Asked Questions
Does this template provide specific cost or financing assumptions?
No. This is a structural template for organizing the statement — every construction cost, fee, contingency percentage, and financing amount must be sourced and justified for the specific transaction being modelled, following the guidance in the Sources and Uses Modelling technical guide.
Why does the template separate every source and use into its own line?
So each component can be independently sourced, dated, and audited, and so the statement reconciles through formula alone rather than a manually entered balancing figure that would mask any underlying error.
How does this template handle the interest-during-construction circularity?
The IDC line references the drawdown schedule directly rather than a static estimate, and the resulting circularity between total uses and debt sizing is resolved through a controlled iterative calculation, consistent with the approach described in Sources and Uses Modelling and Interest During Construction.
Should equity be entered as a fixed value in this template?
No. Equity should be structured as the calculated residual — total uses minus total debt sources — once debt capacity is determined through debt sculpting, not fixed as an independent assumption the statement is then forced to balance around.
Can this template be adapted for a transaction with multiple debt tranches?
Yes. The debt sources section should be expanded to list each tranche (senior, subordinated, standby) as its own labelled line, sequenced consistently with the payment priority described in Drawdown and Funding Mechanics.
Related Articles
Sources and Uses (of Funds)
A sources and uses statement is the schedule in a project finance model that lists every source of funding for a transaction, senior debt, subordinated debt, sponsor equity, grants, and any other funding instrument, against every use of that funding, construction costs, capitalized interest during construction, reserve account funding, financing fees, and contingency. The two sides must reconcile to the same total with no unexplained balancing figure. It is typically the first schedule built in a project finance model and the one lenders review first, because it is the clearest single statement of how a transaction is actually funded and what that funding is spent on.
Sources and Uses Modelling
The sources and uses statement is typically the first schedule built in a project finance model and the first schedule a lender reviews. Building it as a live, formula-driven reconciliation rather than a static summary requires resolving the circularity between total uses (which includes interest during construction, itself dependent on the debt drawn) and total sources (which includes the debt sized against that same total uses figure). This guide sets out the construction sequence and common errors in building a sources and uses statement that reconciles automatically as assumptions change.
Interest During Construction (IDC)
Interest during construction (IDC), also called capitalized interest, is the interest that accrues on project finance debt drawn during the construction phase, before the project reaches commercial operations and begins generating revenue to service that debt. Because there is no operating cash flow available to pay this interest as it accrues, IDC is typically capitalized, added to the total funding requirement and financed as part of the debt facility, rather than paid in cash during construction. IDC is calculated on the cumulative drawn balance, which itself depends on the total funding requirement, creating a circular reference that is one of the most common structural features of a project finance construction-phase model.
Gearing Ratio
The gearing ratio, also called the debt-to-equity ratio or leverage ratio depending on how it is expressed, is the proportion of a project finance transaction's total funding provided by debt rather than equity. It is read directly off the sources and uses statement as total debt sources divided by total sources (debt-to-total gearing) or total debt divided by total equity (debt-to-equity gearing), and is one of the central negotiated parameters of a project finance transaction, since it directly determines how much of the project's risk is borne by lenders versus sponsors.
Project Finance Model Build Checklist
This checklist is a construction-sequence guide for the model builder, walking through the order in which a project finance model's core modules should be built and the specific construction discipline each one requires, sources and uses reconciliation, construction-period funding mechanics, debt sculpting, reserve accounts, and the cash waterfall. It is distinct from the pre-financial-close audit checklist and the lender model review checklist, both of which verify a model that already exists; this checklist is used while the model is being built.