Sources and Uses: How to Build the Deal Financing Table

The sources and uses table is the first thing you build in almost every REPE acquisition model and every PE LBO model — and the first thing interviewers check when you present a case study. It answers the most fundamental question in any deal: where does the money come from, and where does it go? Get the sources and uses wrong and every downstream calculation (debt schedule, returns, DSCR) is wrong with it.

What sources and uses does

Uses:  What you're spending money on (purchase, costs, refinancing)
Sources: Where the money comes from (debt, equity, rollover, seller financing)
Rule: Total Sources must equal Total Uses — always

The table is a snapshot at closing. It doesn't model what happens during the hold — that's the pro forma or debt schedule. It establishes the capital structure on day one.

REPE sources and uses

Uses side

| Line Item | Calculation | Notes | |-----------|-------------|-------| | Purchase Price | From PSA or OM | Gross asset price | | Closing Costs | 1%–3% of purchase | Legal, title, transfer taxes, broker | | Acquisition Fee | 0.5%–2% of purchase | Sponsor/acquirer fee (if applicable) | | Initial CapEx / TI | Business plan budget | Value-add: renovation reserve at close | | Loan Assumption Costs | If assuming existing debt | Assumption fee, lender consent | | Total Uses | Sum of above | |

Sources side

| Line Item | Calculation | Notes | |-----------|-------------|-------| | Senior Debt | Sized via LTV or DSCR constraint | First mortgage, agency, CMBS | | Mezzanine / Sub Debt | If needed for gap | Higher rate, may be PIK | | Sponsor Equity | Plug — last line solved | Total Uses − All Other Sources | | LP Equity | Sponsor equity × LP % | If JV structure | | GP Equity | Sponsor equity × GP % | If JV structure | | Total Sources | Must equal Total Uses | |

The equity plug

Sponsor equity is always the last line solved, never an input:

Sponsor Equity = Total Uses − Senior Debt − Mezz Debt − Any Other Sources

If equity comes out negative, the deal is over-levered or over-priced relative to what lenders will finance. If equity is unusually low (under 25% of total uses on a value-add deal), flag the leverage risk.

REPE example

Project: $50M multifamily acquisition, 65% LTV

Uses:                          Sources:
Purchase Price      $48,500K    Senior Debt (65% LTV)  $31,525K
Closing Costs (2%)    $970K    Sponsor Equity (plug)   $17,945K
Acquisition Fee (1%)  $485K
Total Uses          $49,955K    Total Sources           $49,955K

Check: $31,525K ÷ $48,500K = 65.0% LTV ✓

PE LBO sources and uses

PE sources and uses adds a few lines that REPE doesn't typically have:

Uses side (PE-specific additions)

| Line Item | Calculation | Notes | |-----------|-------------|-------| | Purchase Enterprise Value | EBITDA × Entry Multiple | Price for the operating business | | Refinance Existing Debt | Target's current net debt | Must be paid off or refinanced at close | | Transaction Fees | 2%–4% of EV | Advisory, legal, financing fees | | Financing Fees | 2%–3% of new debt | OID, arrangement fees — capitalized or expensed | | Minimum Cash | Target's operating cash need | Left on balance sheet post-close | | Total Uses | Sum of above | |

Sources side (PE-specific additions)

| Line Item | Calculation | Notes | |-----------|-------------|-------| | Senior Secured Debt | Sized off leverage multiple (e.g., 4.0–5.0x EBITDA) | Term loan + revolver | | Subordinated / Mezz Debt | Gap between senior capacity and total debt target | PIK common | | Management Rollover | Existing mgmt reinvests portion of proceeds | Aligns incentives; reduces sponsor equity | | Sponsor Equity | Plug | Total Uses − All Debt − Rollover | | Total Sources | Must equal Total Uses | |

PE example

LBO: $500M EV, 5.0x EBITDA, 55% debt, 5% rollover

Uses:                              Sources:
Purchase EV           $500.0M      Senior Debt (3.5x)     $175.0M
Refinance Net Debt       $80.0M    Sub Debt (1.5x)         $75.0M
Transaction Fees (3%)    $15.0M    Mgmt Rollover (5%)       $25.0M
Financing Fees (2%)       $5.0M    Sponsor Equity (plug)  $325.0M
Minimum Cash             $10.0M
Total Uses              $610.0M    Total Sources           $610.0M

Check: Total debt = $250M = 5.0x on $50M EBITDA ✓; Sponsor equity = $325M ≈ 53% of total uses ✓

The sizing sequence: debt first, equity last

Both REPE and PE follow the same discipline:

1. Calculate total uses (every dollar spent at close)
2. Size debt based on lender constraints:
   • REPE: LTV cap, DSCR minimum, debt yield floor
   • PE: leverage multiple (Debt/EBITDA), interest coverage, fixed charge coverage
3. Identify non-equity sources (rollover, seller financing, mezz if separately sourced)
4. Plug equity = Total Uses − Everything Else

Never work backwards from a target equity check unless explicitly asked. In real processes, debt capacity determines equity required — not the other way around.

Common mistakes interviewers catch

Equity as an input, not a plug. Candidates who start with "I'll assume 35% equity" and back into debt are doing it backwards. Size debt from lender constraints, then solve equity.

Forgetting closing costs and fees. Purchase price alone understates total uses by 2%–5%. Every dollar of unaccounted uses must come from equity — overstating returns if omitted.

Double-counting debt. In PE: "refinance existing debt" on the uses side AND new debt on the sources side. The existing debt is paid off from new debt proceeds — it's a use and a source of the same dollars, not additive leverage.

Missing minimum cash (PE). Acquirers leave operating cash on the target's balance sheet. This is a use (cash trapped in the business) funded by equity or debt.

LTV on wrong denominator. 65% LTV = 65% of purchase price (or appraised value), not 65% of total uses including closing costs. Clarify which convention your lender uses.

REPE vs. PE: side-by-side

| | REPE | PE LBO | |--|------|--------| | Primary use | Purchase price + closing costs | EV + refi existing debt + fees | | Debt sizing | LTV, DSCR, debt yield | Leverage multiple (Debt/EBITDA) | | Key debt metric | 65%–75% LTV | 4.0–6.0x Debt/EBITDA | | Equity plug | Same concept | Same concept | | Unique sources | JV LP/GP split | Management rollover | | Unique uses | Initial capex/TI reserve | Refinance existing debt, min cash |

Common interview questions

"Walk me through a sources and uses." Uses: what you're buying and all costs to close. Sources: debt sized from lender constraints, then equity as the plug. Total sources = total uses.

"How do you size the debt?" REPE: minimum of LTV cap, DSCR constraint, and debt yield floor. PE: leverage multiple off EBITDA, constrained by interest coverage and fixed charge coverage covenants.

"What if equity plug is negative?" Deal is over-levered or over-priced. Either reduce purchase price, increase debt capacity (unlikely), or walk away.

"What's management rollover?" Existing management reinvests a portion of their sale proceeds into the new equity structure. It's a source (reduces sponsor equity required) and an alignment mechanism.

The takeaway

Sources and uses is the foundation of every deal model. Debt first, equity last, total sources equal total uses — always. Whether you're underwriting a $50M multifamily acquisition or a $500M LBO, the framework is identical. Master the plug discipline and the sizing sequence, and you'll start every case study on solid ground.