A financial projection is only as strong as its assumptions. If your model only shows the number you are hoping for, it is not underwriting-ready. It is a pitch. Serious capital providers will rebuild your projections their own way, so the strongest position is to hand them a model that already holds up.
That starts with at least two cases: a defensible base case and a realistic upside case. Most experienced sponsors add a third, a downside case.
The base case: what you can defend line by line
The base case is the scenario you expect to happen and can support with evidence. Every assumption should trace back to something real: market data, signed contracts, quotes, or the performance of comparable projects.
- Revenue at market rates, not peak rates
- Ramp-up or lease-up at the pace comparable projects actually achieved
- Full operating costs, including reserves and management
- Contingency sized to the stage of design and construction
- Financing costs included, not left for later
The base case is the number capital is sized against. If it does not work, the deal usually does not work.
The upside case: realistic, not hopeful
The upside case shows what happens if things go better than expected for identifiable reasons: faster lease-up, stronger pricing, or lower costs from a specific procurement advantage. Each improvement should have a reason a reader can test. “The market will love it” is not a reason.
The downside case: proving the project survives
Underwriters care most about what happens when things go wrong. A downside case tests a project against higher costs, slower revenue, a delayed schedule, or tighter pricing. The question is not whether the returns look exciting. It is whether the project can still meet its obligations.
The path to stabilization
Growth looks different once you account for what it actually costs. Every project has a period between opening and stabilized operations when revenue is still ramping but costs are already running. Models that jump straight to year-three performance hide the most capital-intensive phase of the project. Show the path month by month or quarter by quarter until operations stabilize.
Sensitivity analysis: show your work
A sensitivity table shows how results change as a key assumption moves. For example, how coverage and returns shift if construction costs rise 10 percent, or if revenue lands 15 percent below plan. It tells a capital provider you already know where the model is fragile, which builds far more trust than a single polished number.
Underwriting-ready model checklist
- Base, upside, and downside cases built from the same structure
- Every major assumption sourced and documented
- Full CAPEX and OPEX, tied to your pro forma
- A visible ramp-up and stabilization period
- Sensitivity tables on the assumptions that matter most
- Return metrics clearly defined, with the time period stated
FAQ
How many scenarios should a financial model include?
At minimum a base case and a downside case. An upside case is useful for showing potential, as long as it is clearly labeled and supported.
Should the base case be conservative?
It should be realistic and defensible. Overly conservative assumptions can undersell a good project, and overly optimistic ones lose credibility quickly in diligence.
Getting a project ready for capital? Our team works with developers and corporations on business funding and large-cap projects. Start the conversation.
This article is for educational purposes only. It is not an offer, solicitation, or recommendation to buy or sell any security, and it is not tax, legal, or investment advice. All Phoenix Capital Solutions engagements are subject to due diligence, verification, and eligibility requirements. See our full disclosure.
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