Loan Schedule

One amount per line (e.g., 2 million per year)
One amount per line (required)
$ million
Auto-calculated from construction draws
WAL Formula
WAL = Sum(Outstanding) / Peak Principal

Where Outstanding[t] = cumulative draws - cumulative repayments at end of period t. This weighted outstanding method is standard per Yescombe Chapter 12.

Ryan O'Connell, CFA
Ryan O'Connell, CFA

Results

Weighted Average Life
3.00
years
Balanced Schedule
Peak Debt Outstanding
$4.00M
Total Periods
6
Sum of Outstanding
$12.00M
Ending Balance
$0.00M
Debt Outstanding Over Time
Amortization Schedule
Period Draw Repayment Outstanding
Formula Breakdown
Model Assumptions
  • Annual periods (scale inputs for semi-annual or quarterly)
  • Draws and repayments occur at end of each period
  • Each nonzero period-end balance counts as one full period
  • No revolving or re-borrowing during repayment phase
  • Weighted outstanding method per Yescombe Chapter 12

For educational purposes. Not financial advice.

Understanding Weighted Average Life

What is Weighted Average Life?

Weighted average life (WAL) measures the average time that each dollar of debt principal is outstanding. Unlike simple loan term, WAL reflects the actual repayment profile and gives lenders insight into their risk exposure duration.

For project finance, WAL is particularly important because loans typically have construction periods where draws accumulate before repayments begin, significantly affecting the average life calculation.

Why Lenders Care About WAL

Lenders use WAL to assess credit risk and set pricing. A shorter WAL means faster principal recovery, reducing exposure to project risks over time. Many lenders have maximum WAL policies (typically 7-10 years for project finance).

WAL also affects interest rate swap breakage costs, refinancing analysis, and investor returns. Understanding your project's WAL helps negotiate better terms with lenders.

Frequently Asked Questions

Weighted average life (WAL) measures the average time that each dollar of principal is outstanding. It's calculated by summing the loan outstanding in each period and dividing by the peak principal. Lenders use WAL to assess how quickly their exposure decreases over the loan term. Unlike simple loan term, WAL reflects the actual repayment profile.

WAL = Sum(Loan Outstanding per Period) / Peak Principal. For each period, track the cumulative draws minus cumulative repayments to get the outstanding balance at period end. Sum all nonzero period balances, then divide by the peak loan amount (typically at end of construction). This weighted outstanding method is standard in project finance per Yescombe's methodology.

Average life helps lenders assess risk exposure duration. A shorter WAL means principal is repaid faster, reducing credit risk. Lenders often have maximum WAL policies for project finance loans, typically 7-10 years. WAL also affects pricing - longer WAL typically commands higher credit spreads because lenders bear risk for longer periods.

Construction periods increase WAL because drawn balances are outstanding before amortization begins. Per Yescombe Table 12.4, staged construction draws accumulate during the construction phase, and these balances are weighted into the WAL calculation. A 2-year construction period with 4-year repayment produces a WAL of 3 years using the weighted outstanding method.

Loan term is the total time from first draw to final repayment. Average life is the weighted average time principal is outstanding. A 10-year loan with equal annual principal repayments from a single initial draw has WAL of approximately 5.5 years. A bullet loan (all repayment at maturity) has WAL approaching its term. Sculpted repayments can have any WAL between these extremes.

Debt sculpting adjusts repayments to match projected cash flows, maintaining consistent debt service coverage ratios. Front-loaded sculpted repayments (higher payments in early strong cash flow years) reduce WAL and lower lender risk. Back-loaded sculpting (lower early payments) increases WAL. Lenders balance DSCR consistency against WAL targets when structuring sculpted debt.

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