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Sample "Manual Iterations" for a Construction Loan

Enter the values in the light blue cells and press the "Update" button to run the model.

Automatic Iterations            
 
Soft costs for a construction project are often estimated as a percentage of hard costs and are then themselves financed.  
However, by financing interest, one ends up with a circular loop in Excel. How can we avoid this?  
 
The following is a nice example of how to use manual iterations to solve this problem to a high level of accuracy.  
Unlike automatic iterations, this does not require a circular reference and as such, it's much faster than the method that most people use.
 
Without Circular References  
 
Iteration 1  
 
  Hard Costs  
  Soft Costs plus interest  
  Total  
 
  Interest Rate per year  
     
  LTV  
  Financable Costs  
 
  Month Draw Interest Total Draw Ending Balance  
  1    
  2  
  3  
  4  
  5  
  6  
  7  
  8  
  9  
  10  
  11  
  12  
   
 
Iteration 2  
 
  Hard Costs  
  Soft Costs plus interest  
  SubTotal  
  Interest from Previous Iteration  
  Total  
 
  Interest Rate per year  
     
  LTV  
  Financable Costs  
 
  Month Draw Interest Total Draw Ending Balance  
  1    
  2  
  3  
  4  
  5  
  6  
  7  
  8  
  9  
  10  
  11  
  12  
   
 
Iteration 3  
 
  Hard Costs  
  Soft Costs plus interest  
  SubTotal  
  Interest from Previous Iteration  
  Total  
 
  Interest Rate per year  
     
  LTV  
  Financable Costs  
 
  Month Draw Interest Total Draw Ending Balance  
  1    
  2  
  3  
  4  
  5  
  6  
  7  
  8  
  9  
  10  
  11  
  12  
   
 
Iteration 4  
 
  Hard Costs  
  Soft Costs plus interest  
  SubTotal  
  Interest from Previous Iteration  
  Total  
 
  Interest Rate per year  
     
  LTV  
  Financable Costs  
 
  Month Draw Interest Total Draw Ending Balance  
  1    
  2  
  3  
  4  
  5  
  6  
  7  
  8  
  9  
  10  
  11  
  12  
   
 
Iteration 5  
 
  Hard Costs  
  Soft Costs plus interest  
  SubTotal  
  Interest from Previous Iteration  
  Total  
 
  Interest Rate per year  
     
  LTV  
  Financable Costs  
 
  Month Draw Interest Total Draw Ending Balance  
  1    
  2  
  3  
  4  
  5  
  6  
  7  
  8  
  9  
  10  
  11  
  12  
   
 
     
  Interest % Difference from Previous  
  Without Circular References, Iteration 1    
  Without Circular References, Iteration 2  
  Without Circular References, Iteration 3  
  Without Circular References, Iteration 4  
  Without Circular References, Iteration 5  
       
As you can see, within 5 iterations, we have achieved a high level of accuracy.  

 
 
 
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