Extended capital-markets CFO
Match the financing to when cash is needed, when the investment starts producing value and how long the assets will remain useful. Cash, a revolver, term debt and leases can all be sensible. The right comparison includes liquidity left in the business and obligations after the project opens, not just the opening interest rate.
Break the budget into funding needs
Separate land, construction, improvements, equipment, professional fees and working capital. Record deposit dates, delivery dates and operating ramp-up. Some costs may fit an asset facility while others require corporate funding or equity. A single headline budget can hide both a timing shortfall and costs a provider will not finance.
Distinguish bridge funding from permanent funding
A revolver can fund early invoices without necessarily being the best long-term home for completed assets. Conversely, arranging long-term funds too early can create unused-cash cost. Ask whether delayed draws or a defined construction-to-term arrangement are available. MetLife describes private debt structures with different funding and repayment features.
Market reference: MetLife Investment Management: private debt.
Test a delay before choosing a structure
Model the project opening later than planned, costing more and generating cash more slowly. Identify who funds overruns and which obligations start before revenues. A financing that works only on the earliest opening date needs revision before the company commits to it.
- Compare projected debt service with the operating ramp-up.
- Keep a separate working-capital reserve.
- Identify cancellation costs if the project changes.
Preserve flexibility where it matters
Long-lived fixed equipment and short replacement-cycle technology should not automatically have the same term. Keep early sale, relocation and upgrade needs visible. Equipment lease and loan comparisons should cover ownership and end-of-term requirements as well as periodic payments.
Market reference: ELFA: lease and loan comparison.
Illustrative example, not a client result
The decision in practice
A new facility needs equipment deposits before installation and working capital after opening. Financing only the final installed equipment cost can still leave the company short of cash. A useful comparison shows the monthly cash requirement, not merely total project cost less a proposed loan.
What to prepare
- Budget by asset and month, including contingency
- Ramp-up forecast and remaining liquidity
- Current credit agreements and alternative funding proposals
For an initial conversation, a summary is enough. Share private materials only through an agreed channel.
Common questions
Should long-lived assets always use long-term debt?
No. Expected disposal, strategic flexibility, cost and existing funding capacity can outweigh the benefit of matching maturity to asset life.
Can we finance costs beyond physical equipment?
Some providers consider additional project costs. Eligibility must be confirmed by category rather than assumed for the whole budget.
Sources and further reading
Our decision framework is CFO Signals analysis. External references describe market practices and products, not an endorsement, partnership or available offer. Terms and eligibility require confirmation for your transaction.