Question: Creating a Uses Statement
When creating a uses statement, a sponsor should ask what things the company needs in order to create a profitable and sustainable business/project. These items should be listed regardless of whether they will be paid for in cash, credit or contributed by the project sponsors/investors. In other words, the total amount of "uses" listed in the uses statement should be equal to the project's total start up cost, not to the OPIC loan amount. All items on the uses statement should be listed in U.S. dollars at fair market value - including any products, services, property, plant and equipment currently owned by project sponsors that will be directly contributed to the project .
Although the level of detail shown in the uses statement will vary by project, based on the project size and type, at a minimum the uses statement should provide costs broken down into the categories described below and marked in bold in the first column of the sample uses statement (see Table 1). Beyond this level of detail, for projects with a total cost of $2.5 million or less, any expense greater than 5% of the project total should be displayed individually. For projects with a total cost of more than $2.5 million, any expense greater than 10% of the project total should be displayed individually.
The following are examples of the major uses or expense categories:
• Construction/capital expenditure costs - these costs include property, plant, and equipment. They also include professional service fees (i.e. architecture and engineering fees) and permitting fees related to the construction or development of the project's fixed assets. Uses in this category should be broken down into contractor and non-contractor expenses.
• Permanent working capital costs - these costs include operational funds used in the start up of the project (e.g. the first six months to year of the project when the project is not yet generating enough cash to cover its own operating expenses). Typical expenses in this category include office rent, equipment maintenance, initial inventories, salaries, banking fees, and general and administrative costs.
• Developmental costs - these costs include project design fees and non-building related permitting fees. Typical costs include feasibility study fees, legal fees, and accounting fees. Relevant developmental costs incurred up to 12 months prior to the OPIC loan disbursement are generally considered to be included as developmental costs.
• Project contingency costs - these costs are estimated to ensure that the investor can pay for any potential cost over-runs . These costs should be estimated at 5% of the subtotal of fixed assets or "hard costs". Fixed assets include items such as buildings and machinery, NOT liquid costs such as working capital or development costs.
• Interest and financing fees - these fees include the interest on the OPIC, a one time OPIC finance charge, and any other outstanding loans payable prior to the point the project become profitable. These costs will ultimately change depending on the finance terms negotiated between the project sponsors and OPIC.
Table 1. Sample Uses Statement
USES
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Period 1
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Period 2
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Total
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I. Construction/Capital Expenditure Costs
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A. Contractor Costs
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B. Non-Contractor Costs
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II. Developmental Costs
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III. Permanent Working Capital
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IV. Project Contingency Cost
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V. Financing Fees
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TOTAL
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Creating a Sources Statement
To create a sources statement, the investor simply states how the aforementioned costs will be paid for - with the OPIC loan, other loans, cash, and in-kind contributions. For costs that will be paid for with equity, (i.e. with investor cash and in-kind contributions) it is necessary to list the amounts of cash and in-kind contributions U.S. versus non-U.S. investors will contribute. Costs that are covered via an in-kind contribution of capital (i.e. a machine or piece of land) must be currently owned by the project investors and not purchased with OPIC loan funds. The total amount of sources listed in the "Period 1" column should equal the total amount of uses listed in the "Period 1" column of the uses statement - likewise for the "Period 2" and "Total" columns.
Table 2. Sample Sources Statement
SOURCES
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Period 1
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Period 2
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Total
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I. Debt
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A. OPIC Loan
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B. Other loans
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II. Equity
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A. Cash
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U.S. Cash
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Non-U.S. Cash
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B. Non-cash (contributed buildings, equipment, etc.)
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U.S. non-cash sources
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Non-U.S. non-cash sources
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