FIN.10:4.1 - Start with the financing service that is actually needed

Translate the proposed operating or investment action into net usable amounts, dates and currencies. Include the time until the first draw, any staged expenditure and the cash from which the financing will later be serviced. FIN.2 supplies that dated need; FIN.4 supplies the operating account behind it. A requirement for 100 available on Monday is not met by a commitment for 100 signed on Monday if settlement occurs on Friday or fees reduce proceeds to 98.

Clarify whether the comparison concerns new money, refinancing an existing obligation, a backstop or a continuing source of capital. Refinancing must include release of existing security, accrued interest, break costs and the overlap between old repayment and new settlement. A backstop must remain drawable in the state it is supposed to protect. Continuing funding requires a view of renewal and later investment, not just this period’s interest bill.

Form alternatives from sources the corporation could actually use. They can include retained cash, a loan or revolving facility, a debt security, new equity, a lease or a sale of an asset. These sources do not all preserve the same operating rights or ownership. A lease and purchase comparison needs FIN.6’s whole operating alternatives; a divestment needs FIN.9’s remaining-business effects. Retained cash is available only after its other uses and restrictions, and has an opportunity cost even though no external coupon is paid.

Distinguish an indicative possibility, a quoted offer subject to conditions, an executed commitment and settled funds. Compare conditional offers when that is the question, but keep their unmet conditions in the recommendation. Useful next work may be obtaining a term, release or commitment that changes the feasible set. It need not be a more precise ranking of offers that cannot fund the action.