Financial model

Before embarking on a potential project, the proposed sponsor (see Key project parties and their roles) must prepare a “feasibility study” (see Conducting due diligence and understanding “bankability”) to assess the project's viability. If the sponsor decides that the project is viable, it will often then use the feasibility study to explain the project to potential lenders (see Key finance parties and their roles) and any equity investors.

A feasibility study analyses the key elements of a proposed project, and an important part of the feasibility study is the “financial model”. This guidance note explains what the financial model is, what it is used for and how it is checked by the lenders. It also explains the concept of the “base case” financial model, and what is a “model audit”.

See Financial model.