Facilities of this nature require detailed analysis of the business’s financial performance, often referred to as Financial Due Diligence (FDD). Lenders will typically expect at least three years of financial forecasts, aligned with the proposed funding structure, as well as a review of the previous three years’ accounts. Up-to-date management information — including profit and loss statements, balance sheets, and cashflow reports — will also be required.

This work is often outsourced to a specialist accountancy firm, and we can assist in selecting a suitable provider.

Legal Due Diligence (LDD) is also standard practice, ensuring the business has appropriate contracts and protections in place to secure future income and identify any potentially onerous obligations.

Some lenders are able to provide both long-term facilities and day-to-day working capital funding, while others may prefer to work alongside a separate provider.

Once funding is in place, lenders will expect ongoing financial reporting — typically monthly or quarterly — to confirm that performance remains within agreed covenants. For example, a lender may require EBITDA to stay within 20% of forecast levels. Establishing realistic forecasts and sensible covenant terms at the outset is vital; breaching covenants can give lenders a range of enforcement options.

When multiple funders are involved, a standstill agreement may be put in place. This ensures that if issues arise, all lenders agree to communicate and temporarily suspend enforcement actions, giving the business and funders time to agree on a resolution.