Debt advisory is the work of getting a business the right borrowing on the right terms — and, more often than owners expect, of establishing that the borrowing it has is the wrong shape. It is not insolvency work and it is not brokerage. It sits between the company and a lending market that has more products, and more lenders, than any finance director has time to know.
What the market actually offers
The instinct is to ask the incumbent bank, and the incumbent bank offers what it has. The realistic menu is wider:
- Senior bank debt — term loans and revolving facilities, the cheapest money, with the most covenants and the most conservative view of what can be borrowed;
- Asset-based lending — invoice discounting, factoring and facilities secured on stock and plant, which lend against the balance sheet rather than the profit and are therefore available to businesses banks find difficult;
- Direct lending funds — non-bank institutional lenders, more expensive than a bank and considerably more flexible on structure, leverage and covenant package;
- Government-backed schemes, where a state guarantee lets a lender support borrowing it would otherwise decline, particularly for smaller businesses;
- Mezzanine and unitranche structures for acquisitions, sitting between senior debt and equity in both cost and risk;
- Trade and supply chain finance, which funds the working capital cycle at the point it is consumed rather than through a general facility.
The right answer is usually a combination rather than a single product, and the sequence in which facilities are put in place affects what the next one costs.
What lenders are actually deciding
Every credit decision comes down to three questions: can the business service the debt, what happens if it cannot, and is the management team credible. Most declined applications fail the third for reasons that had nothing to do with the first two.
Serviceability is tested through leverage — net debt to EBITDA — and interest or debt service cover. Security is tested through what can be realised: debtors, stock, property, and the value of a debenture over a business whose value is mostly intangible. Credibility is tested through the quality of the information pack and the answers to the questions it prompts.
That last point is where advisory earns its fee. A forecast that does not reconcile to the management accounts, an adjusted EBITDA with unexplained add-backs, or an inability to explain a margin movement will lose a deal that the numbers supported. Lenders are not looking for perfection; they are looking for a management team that knows its own business.
Covenants are the part to negotiate
Businesses negotiate the margin and accept the covenants, which is the wrong way round. The margin is a known cost; the covenants determine who controls the business if something goes wrong.
What matters is not only the level of each covenant but the headroom against forecast, the definitions (what counts as EBITDA, what counts as net debt, whether leases are included), the testing frequency and whether there is an equity cure — the right to fix a breach by injecting shareholder funds. A covenant set with 5% headroom against a forecast that has never been achieved is a breach with a date on it.
Other terms deserve the same attention: prepayment penalties, which determine the cost of refinancing early; the security package and whether it constrains future borrowing; personal guarantees, and the circumstances in which they fall away; and the information undertakings, which set what has to be delivered and when.
Refinancing, and the timing problem
The single most common error is leaving a refinancing too late. A facility maturing in six months is a going concern question for the auditors and a negotiating position for the incumbent lender, who knows the company has nowhere to go. Starting twelve to eighteen months out preserves both the audit position and the competitive tension.
The other recurring error is mismatching the term to the asset. Funding a five-year investment on an overdraft repayable on demand, or a property on a three-year facility, creates a refinancing risk that has nothing to do with the underlying performance of the business.
What a process looks like
Prepare first: a clean information pack with historic accounts, a reconciled forecast, an explained adjusted EBITDA, and answers ready for the obvious questions. Approach several lenders in parallel rather than sequentially, because competition is the only reliable route to better terms. Compare offers on total cost and structure rather than headline margin. Then run the diligence and documentation with someone who has read a facility agreement before.
Acumon supports this through financial modelling for the forecasts lenders test, management accounts that stand up to scrutiny, and financial due diligence where an acquisition is being funded — with cash flow monitoring as the covenant early-warning system afterwards. If a facility matures within the next year, that is this quarter's work.