Illustrative example · not a completed transaction
Combining refinancing and construction finance in Spain
This example combines two uses in one structure: redeeming an existing acquisition loan and reserving enough cash for construction. The amounts and terms must be calculated for each project and do not represent an offer.
Quick answer
A combined facility should reserve construction cash after the acquisition loan is repaid. The financing model, technical cost-to-complete report and legal drawdown schedule need to agree on the opening debt redemption, sponsor contribution, later works funding and final repayment route.
Before deciding
The questions that change the answer
What exact amount leaves the facility on day one to repay existing debt?
How much committed cash remains for works, fees, taxes and contingency?
Which equity and progress conditions apply to later drawdowns?
Can sales or refinance repay both the opening and construction tranches?
The problem
If refinancing and construction are assessed separately, the first closing may solve today's maturity while creating a later completion shortfall.
The structure to test
A senior facility may use an initial refinancing tranche followed by construction drawdowns linked to certified progress, remaining cost and sponsor equity.
The objective
Coordinate outgoing debt, new security, sponsor cash and construction funding so the initial redemption does not consume money required to finish.
Treat both uses as one obligation
The lender may document separate tranches, but the project must repay the combined balance. Sources and uses should therefore cover the redemption, every completion cost and the full interest period in one model.
Compare before deciding
Keep refinancing and construction within one funding test
The two tranches may have different uses, but both compete for the same value, maturity and repayment cash.
| Component | Mechanic | Control |
|---|---|---|
| Opening tranche | Pays the dated acquisition-loan redemption | Funds flow and simultaneous security release |
| Construction tranche | Draws against certified works | Technical monitoring and cost-to-complete test |
| Sponsor equity | Paid before or alongside debt | Evidence, permitted uses and timing |
| Interest reserve | Funds interest during the build | Adequacy through a delayed-completion case |
| Sales proceeds | Repay debt through release prices | Unit-by-unit balance and final debt clearance |
Process
Design one closing and completion plan
A combined structure should remove reliance on a second financing while keeping later construction conditions achievable.
- STEP 01
Define the exact need
Set out what the money pays for, the amount required on each date, the critical milestones and the fallback if the main plan is delayed.
Output: Funding need and critical-path map
- STEP 02
Reconcile the evidence
Match the financial model to title, permits, valuation, contracts, paid invoices, debt, sales and the sponsor's proof of equity.
Output: A consistent lender information pack
- STEP 03
Design the structure
Size usable proceeds, drawdowns, maturity, repayment, security, covenants and contingency against a base case and a downside case.
Output: A financeable structure
- STEP 04
Run a selective market process
Approach only lenders or investors whose mandate fits the location, asset, stage, amount and timetable, using the same information for each.
Output: Comparable proposals
- STEP 05
Complete diligence and documents
Coordinate valuation, technical, legal, tax and KYC work, track conditions and confirm that the signed mechanics deliver the expected cash.
Output: A controlled path to closing and drawdown
Illustrative example · not an offer
Allocate the facility before agreeing the headline amount
Illustrative structure, not a completed Jubarta transaction or financing offer.
Total facility
€13.0m
Maximum commitment across all uses.
Opening redemption tranche
€5.0m
Existing debt, accrued amounts and discharge.
Construction tranche
€6.5m
Controlled future drawdowns for eligible project costs.
Interest and cost reserve
€1.5m
Financed costs through the assumed term.
Sponsor completion contribution
Modelled separately
Cash required by the complete project budget and drawdown timing.
The €13 million commitment only solves the problem if each ring-fenced use is sufficient and the sponsor can meet the cash and conditions between drawdowns.
Working tool
Combined refinancing and construction checklist
Use one pack to reconcile the outgoing facility, remaining works and end-to-end exit.
Opening closing
- Redemption statement and security releases
- New funds flow and closing costs
- Sponsor equity at closing
- Corporate, KYC and source-of-funds documents
Completion
- Building permit and approved design
- Paid and remaining budget
- Construction contract and programme
- Drawdown and overrun mechanics
Repayment
- Sales and collection schedule
- Release-price calculation
- Refinance conditions and timing
- Delay, cost and value sensitivities
Before signing
Red flags
They do not automatically make a transaction unfinanceable. They show where information must be reconciled, more headroom is required or the structure needs to change.
- 01
The opening tranche is based on principal rather than a dated redemption figure.
- 02
Construction commitment excludes professional, tax or finance costs.
- 03
The first draw consumes contingency intended for completion.
- 04
Later draws require sales or equity not shown in the cash flow.
- 05
The combined balance is tested only against gross completed value.
Method and sources
This is an educational, illustrative structure based on general development and refinancing principles. It does not describe a completed transaction or available financing terms.
Public source
Banco de España · Property development loans
Official explanation of staged drawdowns, certified construction progress and interest-only periods in Spanish development lending.
Public source
European Banking Authority · Loan origination and monitoring
European guidance on feasibility, contingencies, projected sales, project timetables and monitoring of real estate lending.
Apply it to your transaction
A useful first answer starts with specific numbers and dates.
Share the location, stage, total cost, existing debt, invested equity, financing need and expected exit. We will assess fit before opening a process.
Frequently asked questions
Clear answers before you start
Why combine refinancing and construction finance?
It removes reliance on a second financing and allows the lender and sponsor to assess the complete cost and repayment route from the outset.
Is the construction tranche automatically available after closing?
Usually not. Later drawdowns depend on permit, equity, certified progress, budget and other conditions set out in the finance documents.
Should the two tranches have separate conditions?
They often do. Opening conditions govern redemption and security; construction conditions govern permit, equity, progress and cost to complete. Both need to work within one facility.
Can the outgoing lender be repaid before the building permit?
Potentially, if the opening tranche can be underwritten on the current asset and the construction tranche remains conditional on the permit. The interim maturity and carry need enough buffer.