Understand the debt.
Read beyond the rate.
Debt Financing Guide. Institutional frameworks for understanding senior debt facilities, covenant terms, and repayment structures—before your next banking conversation.
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Terms. Repayment.
Organize the questions that connect a business need to a financing conversation.
A framework for informed questions.
01 / Understand the facility
Senior debt generally ranks ahead of subordinated debt in contractual repayment priority. Senior does not automatically mean secured: collateral rights and lien priority depend on the documents and applicable law. Have independent counsel review the actual agreements.
| Structure | How it works | Questions to bring |
|---|---|---|
| Term facility | A funded amount repaid on a defined schedule. | What are amortization, maturity, fees, and any balloon? |
| Revolving facility | Borrowing and repayment within an agreed limit and availability period. | What limits availability? Are there clean-down requirements or renewal conditions? |
| Asset-based facility | Availability may be linked to eligible receivables or inventory. | What are advance rates, exclusions, reserves, reporting, and examination costs? |
Priority, collateral, guarantees, permitted uses, and repayment obligations are separate questions. No facility is recommended by this guide.
02 / Read the covenant mechanics
A covenant is a contractual promise or restriction. The definition, measurement period, testing dates, exceptions, and remedies matter as much as the headline ratio.
Financial tests
Ask which measures apply, how earnings and cash flow are defined, which adjustments are permitted, and when compliance is tested. Debt service coverage, leverage, and liquidity tests are not interchangeable. Never substitute a generic calculator for the signed agreement.
Reporting and operating obligations
Identify required financial statements, compliance certificates, insurance, notices, and delivery dates. Ask who prepares and signs each item and what happens if it is late.
Restrictions and consent
Ask about additional debt, liens, distributions, acquisitions, asset sales, and ownership changes. Identify consent requirements and exceptions before making commitments.
Default, cure, and waiver
Ask independent counsel to explain defaults, notice, cure periods, cross-defaults, acceleration, and enforcement provisions. A waiver is not automatic. Record the institution's agreed process for raising issues early.
03 / Examine the repayment path
Amortizing payments
Periodic principal and interest payments reduce the balance. Compare scheduled payments with expected cash timing.
Maturity and balloon
A facility can mature before its amortization schedule ends, leaving a balance due. Renewal or refinancing is not guaranteed.
Rate changes
For a floating-rate facility, ask about the index, spread, reset frequency, floor, and payment recalculation. A higher rate can change debt service.
Early repayment
Ask about prepayment fees, mandatory sweeps, breakage costs, and application of extra principal before assuming early repayment is free.
Test a repayment scenario.
Explore level monthly principal-and-interest payments, a maturity balloon, and an illustrative coverage comparison. Sample assumptions are not rates or terms offered by any institution.
Monthly payment = P × r ÷ [1 − (1 + r)−n], where r is annual rate ÷ 12 and n is amortization months. At 0%: P ÷ n. Balloon is the balance after the maturity month's regular payment.
Coverage = your entered annual cash available ÷ (12 monthly payments + other annual debt service). It excludes the balloon and is an annualized comparison, even for terms under 12 months. It is not a lender-defined DSCR or a covenant compliance result. EBITDA is not automatically cash available.
Model assumes fixed rates within each separate scenario, monthly end-of-period payments, no fees, no draws, and no prepayments. Rate stress recalculates from origination; it does not simulate an actual mid-term reset. Daily accrual, rounding, fees, lender definitions, and contract terms can change actual obligations.
Calculations stay in this page. Inputs are not submitted or saved.
| Month | Payment | Interest | Principal | Balance |
|---|
Build a useful meeting packet.
Select what you have assembled. This checklist records preparation only, not eligibility or approval readiness.
Discuss sensitive records through the institution's approved secure channels. This page does not collect documents.
Go to the source.
Public educational references reviewed October 15, 2026. These institutions do not endorse CBC Capital Partners or this tool.
OCC · Leveraged Lending handbook ↗
OCC · Commercial Real Estate Lending handbook ↗
SBA · 7(a) loan program overview ↗
OCC handbooks describe supervisory lending frameworks, not borrower-specific advice. The real estate handbook is property-focused. SBA program guidance applies to that program and does not establish terms for every commercial facility.
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