What are the Pros and Cons of Waterfall Finance?

Waterfall finance essentially refers to the structure of financing that symbolizes a waterfall. Here there is a certain hierarchical structure that needs to be followed while repayment of loans. What happens is that the bigger creditors are paid back their interests and installments after that smaller creditors are paid back. This occurs mainly because the bigger creditors tend to give out loans of a larger amount than the smaller creditors. This system has many benefits. The topmost benefit being that it allows for larger loans to be paid off first, this helps in lessening the burden of the repayments. The requirements of the repayment are listed prior to the beginning of the process and remain constant throughout. The end goal of the plan is also known earlier than other structures due to the unchanging nature of this model. All stages of the structure are documented which helps developers to get all the necessary information whenever they wish to. 

With pros however come cons to everything. In the same manner , the waterfall finance model too has some cons. Due to its unchanging nature there is a lack of flexibility. 

This causes a problem when unforeseen situations arise on the part of the borrower and there is a difficulty in repayment. All requirements must go before development, which will delay the start of the project too much. You will also need strict maintenance and regular supervision so that the project is on time. In general, when using a waterfall, it is almost impossible to return to the previous step and fix some. Even if a certain step is completed, with errors, the next steps are also threatened. Changes in start-up plan This development method is suitable for very expensive projects. There are many global industries where changes in mass markets are not significant.  

Having said this , the waterfall finance models have both merits and demerits. While opting for the waterfall model model it really depends on your financial situation and how ready you are to take on a model that would best suit your case.