Key takeaways
- A funding gap is the money needed beyond the equity and facilities arranged. It should be visible months in advance.
- The table must separate inflows, outflows and sources of funds by month, and check that Sources equal Uses every month.
- The example project has a Peak Funding of THB 867.9 m, but the funding gap that must be found is THB 49.7 m in month 30, because equity and facilities cover the rest.
What this table answers
A funding gap analysis answers three questions: in which month the shortfall begins, how large the shortfall is at its peak, and when cash flow turns positive again. The monthly table should cover the full project term, while near-term liquidity management should have a separate 13-week forecast.
Steps to build it
- Set the time axis. Use months running down the rows and set month 0 as the construction start date. Negative values are the project preparation period.
- Enter a single set of assumptions. Keep inputs separate from formulas, including costs, programme, payment terms, sales speed and loan terms.
- Build the outflows. Land cost, the Hard Cost S-curve according to payment terms, Soft Cost, marketing, commission and transfer day costs.
- Build the inflows. Booking deposits, progress instalments tied to construction progress, and transfer payments per the actual transfer schedule.
- Calculate net cash flow and the cumulative balance to find Peak Funding before financing.
- Add a funding-source waterfall. Use equity first, then loans as they can be drawn. Any excess is the funding gap.
- Calculate interest on the opening balance. This avoids circular references and still gives figures that are easy to understand.
- Add checks every month, and only then run scenarios.
Core formulas
| Item | Monthly formulas |
|---|---|
| Net Hard Cost progress payment | Progress × Hard Cost × (1 − Advance Recovery − Retention) |
| Payments to contractor | Net progress payments spread according to the payment lag, plus advance and retention release |
| Booking deposit + contract deposit | Sales added this month × sales value × booking deposit % |
| Instalment payments | Change in (cumulative sales × cumulative progress) × sales value × instalment % |
| Transfer payments | Units awaiting transfer × transfer schedule |
| Interest | Opening debt × interest rate ÷ 12 |
| Funding Gap | Shortfall after equity and loan facilities are fully used |
Peak Funding = the largest negative cumulative net cash flow before financing
Example table for the tightest period
Example project: payment terms 20/15/65, equity THB 400 million, facility THB 450 million, interest 7% per year, figures in THB million
| Month | Inflows | Outflows | Net | Interest | Cumulative before financing | Closing debt | Cumulative gap |
|---|---|---|---|---|---|---|---|
| 24 | 17.0 | 42.1 | −25.1 | 2.6 | −863.2 | 450.0 | 29.9 |
| 25 | 16.7 | 21.4 | −4.7 | 2.6 | −867.9 | 450.0 | 37.2 |
| 26 | 17.8 | 14.5 | 3.3 | 2.6 | −864.6 | 450.0 | 36.6 |
| 27 | 18.3 | 15.5 | 2.8 | 2.6 | −861.8 | 450.0 | 36.4 |
| 28 | 20.9 | 19.0 | 1.9 | 2.6 | −859.9 | 450.0 | 37.2 |
| 29 | 17.1 | 21.8 | −4.7 | 2.6 | −864.6 | 450.0 | 44.4 |
| 30 | 15.5 | 18.1 | −2.6 | 2.6 | −867.2 | 450.0 | 49.7 |
| 31 | 455.2 | 36.2 | 418.9 | 2.6 | −448.3 | 83.4 | 0.0 |
| 32 | 380.1 | 26.9 | 353.2 | 0.5 | −95.1 | 0.0 | 0.0 |
| 33 | 270.9 | 18.3 | 252.6 | 0.0 | 157.5 | 0.0 | 0.0 |
| 34 | 161.7 | 11.1 | 150.6 | 0.0 | 308.2 | 0.0 | 0.0 |
Outflows exclude interest. The cumulative gap rises or falls with net cash flow after interest. When transfers begin in month 31, inflows repay the gap first and then the bank debt. In practice, the order must follow the loan agreement. If the bank has the right to be repaid first, the party that funded the gap must wait until the bank debt is cleared.
Checks every table needs
- Total cumulative Hard Cost equals the budget, and the work categories add up to 100%
- Total sales inflows equal the sales value used in the model
- Payment terms add up to 100%
- Sources equal Uses every month
- Debt does not exceed the facility and is never negative
- Total equity does not exceed what shareholders have agreed, before it becomes a gap
- Cumulative profit matches closing cash at the end of the project
Reconciliation of the example project
| Revenue from sales | 2,100.0 |
| Less: land | (250.0) |
| Less: Hard Cost | (1,000.0) |
| Less: Soft Cost and contingency | (170.0) |
| Less: marketing | (42.0) |
| Less: commission | (63.0) |
| Less: Specific Business Tax (SBT) at 3.3% | (69.3) |
| Less: transfer fee at 1% | (21.0) |
| Profit before interest and tax | 484.7 |
| Less: interest | (35.6) |
| Profit before tax | 449.1 |
| Less: corporate income tax (CIT) at 20% | (89.8) |
| Net profit | 359.3 |
For simplicity, this example calculates tax on the whole profit before tax. In practice, the calculation must be adjusted for revenue recognition rules, expense conditions and the tax year.
What to do once you see a gap
| Option | Effect on the gap | Trade-off |
|---|---|---|
| Adjust payment terms | Brings in more cash before transfer | May affect sales speed or require discounts |
| Accelerate sales to reach the target by the time construction is complete | Increases cumulative instalments and units awaiting transfer | Higher marketing budget and discounts |
| Pay commission in instalments linked to transfer day | Reduces outflows during construction | Must be agreed with the sales channels |
| Extend credit terms | Temporarily reduces outflows | May require a larger performance bond or a higher price |
| Increase equity or a shareholder loan | Closes the gap directly | Lowers shareholder returns or ties up more money |
| Extend the facility or add mezzanine financing | Closes the gap directly | Cost and security requirements |
| Split construction into phases | Reduces the peak per phase | Construction cost and programme may increase |
How to keep using the table
Review it monthly. Replace assumptions with actual figures from work certificates and sales reports, report variances from plan line by line, and link the 13-week forecast for near-term cash to the monthly table.
| Emergency funding sources, in order | Use when |
|---|---|
| Existing cash reserves | Short-term deviations |
| Committed facilities not yet drawn | Expected shortfalls in the short to medium term |
| Uncommitted facilities | A supplementary option, but the bank is not obliged to provide it |
| Shareholder Loan | A gap that must be closed quickly |
| Sell non-core assets | A large gap with time to prepare |
| Bridge Loan | Needs money urgently; high cost; short-term use |
| Emergency equity injection | When no other route can close the gap |
- Watch for Days Cash on Hand below 30 days, sales speed below 50% of plan, or a cost overrun above 10%
- Run stress tests covering lower sales, higher costs and construction delays
- Request a facility extension or negotiate with the bank before the month in which the gap will arise