How much recurring cash is available for debt?
We bridge earnings to cash after taxes, maintenance capital spending and working-capital needs. The base case and a realistic downside case show what the combined payment schedule asks of the business.
The financing decision
For companies with $10M to $100M+ in revenue.
A structure built around your business.
A capital structure is the mix of debt and equity funding a business. Term loans can finance defined investments; revolvers serve recurring working-capital needs; subordinate debt can add another layer where repayment capacity permits. Every layer draws on the same business. We test cash interest, scheduled principal, capital spending and maturity obligations together, then compare lender terms for a structure that supports the plan and retains room for a weaker period.
Before the file goes to market
Get the important questions answered early.
Which job should each facility perform?
We separate long-lived investment from recurring liquidity. A term loan, a revolver and a junior layer should have distinct uses, compatible collateral positions and repayment schedules that fit the assets and cash flows they finance.
What flexibility does the company retain?
The comparison covers total leverage, covenant definitions, additional-debt restrictions and early-payoff terms. Junior debt may add capacity, but its payments, accrued interest and maturity still have to fit the same plan.
Compare the structures
Choose debt that fits the job.
Senior term loan
Where it can fit
A defined financing need supported by recurring cash flow and the lender’s collateral and leverage requirements.
What to examine
The amortization schedule and covenant definitions can matter as much as the quoted interest rate.
Private credit or unitranche
Where it can fit
A business needs a negotiated term-debt structure that an appropriate private lender is prepared to underwrite.
What to examine
Include fees, call protection, cash sweeps and any deferred interest when assessing cost and future obligations.
Revolver alongside term debt
Where it can fit
The company needs flexible operating liquidity in addition to funding for a defined investment.
What to examine
Model combined debt service, actual draw availability and the collateral arrangements between lenders.
Mezzanine or seller debt
Where it can fit
A subordinate layer may fill a financing gap where the senior lender permits it and total obligations remain supportable.
What to examine
Payment restrictions, deferred interest, warrants and final maturities can change the economics for the owner.
Structures depend on the business, transaction and lender requirements. OCC: Commercial Loans handbook
Why run a process
Make lenders compete for your company.
Save on time and costs.
Once the documents are in, software builds the financing model, the lender presentation and the blind teaser in a day; by hand the same package takes at least a week. A senior banker checks every page, so you are not paying for analyst hours. Lenders that fit see the teaser first, and you approve each one by name before it learns who you are. Your banker compares the term sheets and negotiates to close.
What your banker will ask for.
These documents move the work forward. You can start the conversation before the file is complete; your banker tells you what is missing.
- Financial statements for recent years
- Year-to-date results and support for earnings adjustments
- Complete debt schedule, loan agreements and covenant calculations
- Forecast with working-capital, tax and capital-spending assumptions
- Use of funds, ownership structure and planned equity contribution
A confidential first conversation: what the capital is for, and what the package will need.
Before you start
The questions worth asking.
- Why is an EBITDA multiple not enough to size a loan?
- EBITDA does not pay the lender by itself. Taxes, capital spending, working capital and other obligations consume cash. The loan’s rate, amortization and maturity determine what must be paid and when. We assess both leverage and the cash available to meet the full schedule.
- Does junior debt avoid the senior lender’s limits?
- Not automatically. Senior agreements can restrict additional debt, liens and junior payments, and may test total leverage. Any subordinate layer needs to fit those provisions or obtain consent. We evaluate the combined structure rather than treating each proposed loan as an independent source of capacity.
- Is private credit always the better option for flexibility?
- No. Flexibility is negotiated, and it comes with a specific set of costs and restrictions. We compare the terms available for the actual transaction, including covenants, amortization, call protection and information requirements. The right answer may be bank debt, private credit or a combination.
- What happens if the plan requires more debt than the business supports?
- The plan needs to change. That can mean more equity, a smaller investment, staged funding, different seller terms or a later transaction. Adding another layer without a supportable repayment case moves the problem into the future. We identify that gap before asking lenders to underwrite it.
Go deeper
Work through the details.
How much debt can my business carry?
Every lender answers this question before you ask it. Knowing how they reach the number tells you what to fix before you go to market, and what no amount of negotiating will change.
Senior leverage vs total leverage: what's the difference?
A company can be well inside its senior lender's limit and still carry more debt than its business can bear. Lenders measure both, and set a separate ceiling on each.
What is an intercreditor agreement?
When a company has two lenders, a contract between them decides who gets paid, who can act and who must wait when the business has a bad year. The borrower is bound by it and rarely gets a say once it is signed.
How much covenant headroom should you negotiate on a business loan?
A financial covenant is a line drawn against your own forecast. Drawn too close, it can put a sound business in default in an ordinary bad quarter, and the time to move it is before the agreement is signed.
Why do lenders separate maintenance capex from growth capex?
Every dollar a lender counts as maintenance capex is a dollar it will not lend against. A business that cannot show which of its spending keeps the lights on and which builds new earnings gets sized as if all of it were unavoidable.
What does a layered capital stack actually cost?
Owners judge each layer of a financing by its rate, and the rate is the wrong number. What matters is the weighted cost of the whole stack, and the most expensive capital in it is usually the equity nobody put a rate on.
Browse all 48 capital structure guides
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