Using a debt advisor or broker vs going direct to your bank

What your own bank can and cannot give you

A bank that already holds your deposits and your revolver has real advantages. It knows your account history, it can see cash moving through the business, and a relationship banker can often move a straightforward request through credit without much friction. For many companies that is exactly the right lender.

What the relationship cannot change is the bank's box: the set of loans its credit policy lets it make. Every lender has one. It sets how far the bank will lend against EBITDA, which industries it likes and which it avoids, what collateral it wants, how fast the loan must amortize, whether it does asset-based lending at all, and how large a single loan it will hold. A banker who likes you can argue for an exception, but cannot turn a bank into a private credit fund.

So when your bank says no, or says yes with terms you did not expect, the answer tells you about that bank's box, not necessarily about your business. Many companies turned down by their own bank go on to close with a different kind of lender, because the loan was never a bank loan in the first place. See who lends to lower-middle-market companies and relationship banks, national banks and private credit.

Three ways to raise the same loan

"Broker" covers two very different services. Some brokers forward whatever you send them to a list of lenders and hope one bites. A debt advisor prepares the file the way a lender's credit committee will read it, chooses the lenders whose box the deal fits, and manages the competition through closing. The difference shows up in what lenders receive and in how they respond.

A file sent half-finished to many lenders is worse than a file sent to none. Lenders remember the deal they already declined.

What competition changes, beyond the rate

Owners tend to judge a loan by its interest rate. Lenders compete on much more than that, and the terms that matter most to an owner are often the ones a single lender has least reason to give up.

• Amount. Senior cash-flow lenders to lower-middle-market companies commonly lend 2x to 3.5x EBITDA, and unitranche lenders stretch further. Where your bank sits in that range, and whether another lender would sit higher, is only visible if you ask more than one.
• Amortization. A lighter schedule lowers the payment and eases coverage. Banks and private credit funds amortize very differently; see loan term vs amortization period.
• Covenants. Which ratios are tested, how often, how EBITDA is defined and how much cushion there is. Headroom is negotiable when a lender knows another is waiting; see covenant headroom.
• Personal guarantees. A guarantee can sometimes be capped, limited to certain events or made to burn off. That concession rarely appears without competition; see limited vs unlimited guarantees.
• Prepayment and lender fees. Call protection, original issue discount, closing fees and unused-line fees change the real cost; see interest rate vs all-in cost.

Competition also reveals structures you would not have known to ask for. A company that asked its bank for a term loan may learn that an asset-based line plus a smaller term loan fits better, or that a unitranche lender will fund a partner buyout the bank would only half-fund. Those answers come from lenders whose box differs from your bank's, which is the point of asking them.

Lenders an owner would not find alone

Most owners know a handful of banks. The lenders that fit a particular deal are often ones they have never heard of: a fund that specializes in their industry, a lender that finances acquisitions the size of theirs, an asset-based lender comfortable with their receivables and inventory. Midas Partners's lender book holds 1,800+ lenders; for the debt this page is about, it breaks down as follows.

The value is not the count. It is knowing which of those lenders is active in a deal of your size, industry and structure now, and sending the file only to them. Lenders that fit see a blind teaser first, and the owner approves each lender by name before it learns who the company is. See the lender book.

When going direct is the right call

An advisor adds little when the answer is obvious and your bank is the natural lender. Going direct usually makes sense when:

• The request is a renewal or increase of a facility your bank already provides, on terms you are satisfied with.
• The loan is modest relative to earnings and coverage is comfortable. Conventional bank lenders commonly look for debt service coverage of at least 1.25x, and a request well inside that clears without argument.
• It is an equipment loan or an owner-occupied real estate loan your bank does routinely.
• The bank has already signaled a clean yes, and certainty with a lender you know matters more to you than the last increment of terms.
• You have a finance team that can build a lender-grade model and package and knows the current market.

Even then, it is worth knowing what your bank is offering against the market. An owner who can say another lender would do the deal with lighter amortization or looser covenants often gets it from the bank that already holds the relationship.

When a prepared package and several term sheets earn their place

The case for a process grows with the size and complexity of the deal. Typical examples:

• Acquisitions. A buyer needs lenders that understand goodwill, add-backs, seller notes and rollover, and often more than one layer of capital. See the steps from LOI to closing.
• Recapitalizations and partner buyouts. Taking money off the table on debt means sizing the loan against what the company can carry, often beyond a bank's comfort. See recapitalizing without selling.
• Leverage above the bank's box, where the answer may be unitranche, or a senior loan with mezzanine or second lien behind it.
• A bank that is pulling back: a line cut, a non-renewal or a move to special assets. See when your bank won't renew your line.
• Unusual collateral or earnings: heavy receivables, a down year with a clear explanation, customer concentration, add-backs that need defending.

In each case the package matters as much as the lender list. Once a borrower's documents are in, Midas Partners builds the financing model, lender presentation, blind teaser and underwriting memo in a day; built by hand, the same package takes at least a week. Senior bankers run every engagement, and a senior banker checks every page before the client approves it. Lenders who receive a file that already answers their questions spend their time deciding, not asking. See what goes in the package.

What to ask before hiring anyone

• How is the fee set, and is it agreed in writing before anything goes to a lender? Midas Partners agrees its fee with the client in writing before anything goes to a lender.
• What will lenders receive from you? If the answer is "your statements and a summary", the lender is doing the work you are hiring someone to do.
• Which kinds of lenders will see the file, and do I approve each one by name before it learns who we are?
• Will you include my current bank? A process that excludes the lender that knows you best is leaving an option out.
• Who runs the deal day to day, and how senior are they?
• Will you help compare term sheets on all-in cost, covenants and guarantees, not just rate, and stay through the credit agreement?

An advisor who cannot answer those plainly is forwarding files. See what Midas Partners does and how we underwrite.