## What Is Interest During Construction?

Interest During Construction is the interest that is applied in the construction period. It is calculated on the debt for the project. You will need to know the debt, the interest rate and some other variables to calculate Interest During Construction.

## Step by Step Calculation of Interest During Construction in Excel

We will use the following sample dataset for illustration. The Start Date and the End Date of the construction period are given. The annual Interest Rate is 8%. And the Debt in Year 1 is $88,500 and in Year 2 is $90,550.

### Step 1 – Select Drawdown Mode and Frequency

- Create a section for entering the Drawdown Mode and Drawdown Frequency.

- Select the cell where you want to show the Drawdown Mode. We have selected cell
**C12**. - Go to the
**Data**tab. - Select
**Data Validation**.

- The
**Data Validation**dialog box will appear. - Select the
**Settings**tab. - Click on the drop-down button for
**Allow**from**Validation criteria**. - Select
**List**.

- Enter the options you want in the
**Source**section. - Select
**OK**.

- You will see a drop-down button has been inserted in your selected cell which is cell
**C12**.

- To select Drawdown Mode, first Click on the drop-down button.
- Select the mode you want. we have selected Quarterly.

- You will see that Quarterly is showing as Drawdown Mode.

- Select the cell where you want to show the Drawdown Frequency. we have selected cell
**C13**. - In cell
**C13,**enter the following formula.

`=IF(C12="Annually",12,IF(C12="Half Yearly",6,3))`

- Press
**Enter**and you will get your Drawdown Frequency.

**How Does the Formula Work?**

**IF(C12=”Half Yearly”,6,3):**the**IF**function returns**6**if the**logical_test**is**True**. Otherwise, it returns**3**.**IF(C12=”Annually”,12,IF(C12=”Half Yearly”,6,3)):**the**IF**function returns**12**if the**logical_test**is**True**. Otherwise, it will go to the next**IF**function.

### Step 2 – Create Table for Interest During Construction

- Create a table with 4 columns.
- Name the columns as Date, Drawdown Amount, Cumulative Amount and Interest.

**Step 3 – Insert Dates into Table**

We will insert the Dates for every drawdown period for the project.

- Select the cell where you want the first Date.
- Enter the following formula in that selected cell.

`=C4`

- Press
**Enter**to get the Date.

**C4**. In this case, it returns the Start Date of the construction period.

- Select the cell where you want the second Date. we have selected cell
**B18**. - In cell
**B18**enter the following formula.

`=IF(B17<$C$5,EDATE(B17,$C$13),"")`

- Press
**Enter**to get the Date.

- Drag the
**Fill Handle**down to copy the formula to the other cells.

**How Does the Formula Work?**

**EDATE(B17,$C$13):**In**the EDATE function**, we selected**B17**as**start_date**and**C13**as**months**. The formula will return the date after the months in cell**C13**from the date in cell**B17**.**IF(B17<$C$5,EDATE(B17,$C$13),””):**The**IF**function will check if the value in cell**C5**is less than the value in cell**C5**. If the**logical_test**is**True**then the formula returns the Date generated by the**EDATE**Otherwise, it returns blank.

*Note:**W*e have used Absolute Cell References for the fixed values so that the formula does not change while using

**Autofill**.

- You can see that we have copied the formula to the other cells and got the desired output.

- In the following image, you can see that the last date is after the End Date. So, we will delete this date.

- This is how the table looks like at this stage.

**Read More:** How to Calculate Interest Between Two Dates in Excel

**Step 4 – Calculate Drawdown Amount**

- Select the cell where you want to calculate the Drawdown Amount for Year 1.
- Enter the following code in that selected cell.

`=$C$9/(12/$C$13)`

- Press
**Enter**to get the result.

- Drag the
**Fill Handle**down to copy the formula to the remaining cells.

**C13**which is the Drawdown Frequency. The Debt in Year 1 is divided by the result.

- You can see that we have copied the formula and got the Drawdown Amount for Year 1.

- Select the cell where you want to calculate the Drawdown Amount for Year 2. we have selected cell
**C21**. - In cell
**C21,**enter the following formula.

`=$C$10/(12/$C$13)`

- Press
**Enter**.

- Drag the Fill Handle down to copy the formula to 3 more cells as the Drawdown Mode is Quarterly.

**C13**which is the Drawdown Frequency. The Debt in Year 2 is divided by the result.

- You can see that we have copied the formula.

**Step 5 – Calculate Cumulative Amount**

- Select the cell where you want the first Cumulative Amount. we have selected cell
**D17**. - In cell
**D17,**enter the following formula.

`=C17`

- Press
**Enter**.

**C17**.

- Select the cell where you want to calculate the next Cumulative Amount.
- Enter the following formula in that selected cell.

`=C18+D17`

- Press
**Enter**.

- Use the
**Fill Handle**for the remaining cells.

**C17**and

**D17**.

- You can see that we have copied the formula to the other cells and got the Cumulative Amount.

**Read More:** How to Use Cumulative Interest Formula in Excel

**Step 6 – Determine Interest**

- Select the cell where you want to calculate the Interest.
- Enter the following formula in that selected cell.

`=D17*$C$6*($C$13/12)`

- Press
**Enter**.

- Use the
**Fill Handle**tool for the remaining cells.

- You can see that we have copied the formula to the other cells and got the Interest.

**Step 7 – Calculating Interest During Construction in Excel**

- Select the cell where you want to calculate the Interest During Construction. we have selected cell
**E26**. - In cell
**E26,**enter the following formula.

`=SUM(E17:E24)`

- Press
**Enter**to get the Interest During Construction.

**the SUM function**, we have selected cell range

**E17:E24**as numbers. The formula returns the summation of the cell range

**E17:E24**.

### Final Output

In the following image, you can see the final output of the calculation for Interest During Construction.

**Download Practice Workbook**

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- How to Calculate Daily Interest in Excel

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