Finance for large businesses: facilities for bigger companies

For accounting and reporting, company size is set by the Companies Act using turnover, balance sheet total and average number of employees. A company is generally classed as large if it exceeds two of the three thresholds, one of which is more than 250 employees. The financial thresholds are reviewed from time to time, so check the current figures on Companies House. Lenders often use their own definitions, typically based on turnover.

Larger structured facilities usually suit established companies with audited accounts, consistent profits or a clear path to them, reliable monthly management information and a finance function able to meet regular covenant reporting. Lenders look at:

• Audited accounts and up-to-date management information
• Cash flow forecasts and financial models
• Debt service cover, gearing and existing facilities
• The quality of the debtor book, stock and assets
• Management experience and governance
• Sector outlook and customer concentration

Larger facilities usually come with covenants, such as minimum interest cover or maximum leverage, and regular reporting. Understand these before signing, because a breach can give the lender the right to review or withdraw the facility.

Larger and more structured facilities typically take six to twelve weeks from first approach to drawdown, and multi-facility refinancings or acquisition packages can take longer. A single asset finance line or a straightforward term loan may complete in a few weeks. Asset-based lending and invoice discounting take longer because the lender usually carries out a field audit of the debtor book and commissions independent valuations of stock, plant or property. Moving facilities from an existing bank adds time for redemption figures, releases of security and, where more than one lender is involved, negotiating an intercreditor or priority agreement. Good-quality management information and a clean schedule of existing facilities are what most often keep a timetable on track.

Larger facilities are normally secured by an all-assets debenture with fixed and floating charges over the borrowing company, and often cross-guarantees and debentures from other companies in the group. Asset-based lending takes specific fixed charges over receivables, plant and machinery, with stock and property charged where they form part of the borrowing base. Commercial property is secured by a legal charge, and asset finance by the equipment itself. Where several lenders provide different facilities, an intercreditor or deed of priority sets out who ranks first against which assets. Personal guarantees are less common at this size than in SME lending, but owner-managed companies may still be asked for limited ones. Our guide to debentures and charges covers the mechanics.