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Redactie
Financieel Management

It is quite common to invite several banks to pitch for the opportunity and this will usually include the company’s present bankers.

The investor (and the financial adviser) will have the banking relationships and experience with bank negotiations and will lead the process. In conjunction with the management the loan proposals will be evaluated and a bank will be selected to provide the requisite lending. Among the key features to look for in any debt package are: the interest rate, the repayment profile, the security required, any follow-up funding, the general undertakings (business ‘restrictions’) and the financial covenants. Management has to make sure they fully understand the timing of debt repayments and the covenants.

Management has to choose a bank not only on the financial merits of the proposal but also as a partner. Just like the investor, the bank will become management’s partner for the coming years and it is important that they get along, that the bank is in principle willing to finance further growth and that the bank will still behave like a partner and be constructive and creative should a covenant temporarily break or when the business ‘hits a bump in the road’.

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