When Lenders are pricing their Loans, they use different methods of calculation to account for the repayment of the debt via the unit sales. The two different methods are Bullet and Term Out. Bullet refers to the repayment of the whole debt on the final day of the Loan Term, which is totally unrealistic and means the projected interest is higher than it should be if sales are made before the end of the Loan. Not all lenders recognise Term Out, and for those that do Term Out calculations can differ from Lender to Lender, but it accounts for the sales to be completed (and therefore the debt being reduced) to be staged across the Sales Period. As an example, if you have a 4 month Sales Period the lender may assume a quarter of the debt will be repaid at the end of each of the months. Again this is not realistic, but it is a better Loan Metric than Bullet. By creating an accurate Cashflow before the project, and keeping it up to date through the build, will only help you to actively monitor (and hopefully reduce) your funding costs.
