8. The increased cost of long term borrowing was exacerbated by a reduction in the short term interest rates that Modus could obtain on their cash deposits. In a bond-financed PFI project, funds are drawn down at the beginning of the deal and placed on deposit until they are required. These funds earn interest whilst on deposit. As short term interest rates decreased during the preferred bidder stage, and since MOD eventually chose bank finance, the benefit of funds on deposit in the project was greatly reduced, and consequently resulted in a higher financing cost.