When a business owner, property investor or commercial client requires finance, the natural starting point is often to establish which lenders may be prepared to provide funding.
However, in more complex transactions, I believe this can overlook one of the most important stages of the process: determining how the borrowing should be structured before approaching the lending market.
Securing finance is only one part of the equation. The more important consideration is whether the proposed borrowing is commercially sustainable, appropriate for the client’s circumstances and aligned with their wider financial objectives.
For clients with substantial assets, multiple business interests or existing debt obligations, these questions become particularly relevant.
Good commercial debt advice should begin with understanding what the client is trying to achieve, rather than identifying which lender may provide the funding.
Understanding the Borrowing Requirement Before Seeking Finance
Commercial finance is rarely as straightforward as establishing a loan amount and identifying a willing lender.
Two clients seeking the same level of borrowing may require entirely different financing arrangements.
One may be acquiring an income-producing commercial property as a long-term investment. Another may be restructuring existing facilities to improve cash flow or release capital for business expansion.
Although the funding requirements may appear similar, the underlying objectives, repayment strategies and risks can be very different.
Before approaching lenders, it is therefore important to establish what the borrowing needs to achieve.
This involves considering the purpose of the finance, the assets available as security, existing financial commitments and the anticipated source of repayment.
It also requires an understanding of the client’s longer-term plans.
A facility that meets an immediate funding requirement may not necessarily provide the flexibility needed as a business develops or an investment portfolio evolves.
Establishing these considerations early allows the borrowing strategy to be developed around the client’s objectives, rather than allowing the available lending products to determine the structure.
Looking Beyond the Individual Transaction
For clients with multiple properties, business interests or borrowing arrangements, a new financing requirement should rarely be assessed in isolation.
Existing debt can influence affordability, available security, cash flow and the terms on which additional finance may be offered.
For example, a property investor seeking funding for a new acquisition may already have several loans secured against other assets.
The structure of those facilities, including repayment terms, maturity dates, interest costs and restrictions on further borrowing, can materially influence the options available.
Similarly, a business owner seeking additional capital may have commercial mortgages, asset finance arrangements or other liabilities that need to be considered within the wider financial position.
In these circumstances, the question is not simply whether another lender will provide finance.
It is whether the existing debt structure remains appropriate and how any additional borrowing should fit within it.
A wider assessment may identify opportunities to consolidate facilities, refinance existing obligations or structure new borrowing differently.
Equally, it may establish that retaining the current arrangements is the most appropriate course of action.
The value lies in understanding these options before committing to a particular lender or financing route.
Why the Structure of Debt Matters as Much as the Cost
Interest rates are understandably an important consideration in commercial borrowing.
However, focusing on headline pricing alone can overlook other terms that may have a significant influence on the client’s financial position.
Facility duration, repayment profile, security requirements, financial covenants and flexibility to refinance or repay early can all affect whether an arrangement is appropriate.
A lower-cost facility may appear attractive initially, but restrictive terms could limit the client’s ability to respond to changing commercial circumstances.
Conversely, a financing arrangement with a higher initial cost may offer flexibility that is valuable to the client, depending on their objectives and risk appetite.
For property investors, managing refinancing risk at the end of a facility may be particularly important.
For business owners, maintaining working capital and avoiding unnecessary pressure on cash flow may take priority over securing the lowest available interest rate.
These considerations should be addressed before the lending process begins.
The objective is not simply to secure finance at a competitive price, but to establish a debt structure that remains appropriate for the client’s intended borrowing period and wider commercial strategy.
The Importance of Early Collaboration With Professional Advisers
Commercial borrowing decisions frequently sit alongside wider legal, accounting, tax and investment considerations.
An accountant may have detailed visibility over a client’s cash flow, trading performance and existing financial commitments.
A solicitor may be advising on an acquisition, corporate restructuring or the legal implications of a proposed transaction.
A wealth manager or financial adviser may be considering how borrowing fits within the client’s broader asset position and long-term financial strategy.
Each perspective can influence the financing approach.
For example, a proposed property acquisition may involve questions around ownership structure, the availability of security and the client’s intended holding period.
A business restructuring may affect how lenders assess financial performance, existing liabilities or the ownership of assets.
Where these matters are considered separately, financing decisions may be made before the full implications of the transaction have been understood.
By involving specialist debt advisers early, the borrowing strategy can be considered alongside the work being undertaken by the client’s wider professional team.
At Henry Dannell Private Clients, we work collaboratively with accountants, solicitors, wealth managers and other professional advisers to understand the circumstances behind a commercial borrowing requirement.
Our role is to contribute specialist knowledge of debt structuring, lender appetite and commercial financing arrangements, while ensuring legal, tax and other professional considerations remain within the remit of the relevant advisers.
Early collaboration allows potential lending constraints to be identified and alternative structures to be explored before key commercial decisions are finalised.
The Lender Approach Should Follow the Strategy
Once the client’s objectives, financial position and proposed debt structure have been assessed, the next stage is identifying suitable lenders.
This is where a detailed understanding of the commercial lending market becomes particularly valuable.
Different lenders have different approaches to property types, business sectors, security arrangements, financial performance and repayment strategies.
Some may favour established income-producing assets, while others may consider more complex transactions involving multiple entities, specialist property or non-standard financial structures.
The way a transaction is presented also matters.
A well-prepared lending proposal should explain the purpose of the facility, the client’s financial position, the proposed security, the repayment strategy and the commercial rationale behind the transaction.
It should also anticipate the areas a lender is likely to examine in greater detail.
This preparation helps ensure that discussions begin with institutions whose lending criteria and appetite are more closely aligned with the client’s circumstances.
While it cannot guarantee approval or particular terms, it can provide a more informed basis for lender engagement and negotiations.
The lender approach should be the result of a considered financing strategy, rather than the starting point for developing one.
Considering the Longer-Term Implications of Commercial Borrowing
Commercial debt decisions can have consequences well beyond the initial transaction.
A facility arranged today may influence a client’s ability to acquire further assets, refinance existing obligations, access working capital or respond to future opportunities.
For businesses, borrowing should be considered alongside anticipated trading performance, investment requirements and potential changes in cash flow.
For property investors, factors such as lease expiries, tenant concentration, capital expenditure and future refinancing requirements may affect the sustainability of the debt.
The objective is not to anticipate every possible development.
It is to assess the proposed borrowing against realistic scenarios and ensure the client understands the implications of the commitments being made.
This is particularly important where financing involves significant leverage, personal guarantees or multiple assets being offered as security.
Considering these factors at the outset can help clients make more informed decisions about the level, structure and duration of their borrowing.
It can also highlight circumstances in which a different facility, a revised borrowing amount or a change in timing may be more appropriate.
The Henry Dannell Perspective
In my view, the value of specialist commercial debt advice is not measured solely by the ability to secure funding.
Access to lenders is important, but access alone does not determine whether borrowing has been structured appropriately.
The real value begins earlier, with understanding the client’s circumstances, examining the purpose of the proposed finance and considering how debt can support their wider commercial objectives.
At Henry Dannell Private Clients, our approach is to assess the broader financial position before determining which lending structures and institutions may be appropriate.
This includes reviewing existing borrowing, understanding repayment capacity, considering the security available and assessing how the proposed arrangements may influence future flexibility.
Where clients are already working with accountants, solicitors or other professional advisers, I believe early collaboration is particularly valuable.
It allows financing considerations to become part of the wider commercial strategy, rather than being addressed after key decisions have already been made.
For some clients, this may lead to a different lending structure. For others, it may highlight the importance of reviewing existing facilities before taking on additional debt.
In certain circumstances, the most appropriate recommendation may be to reconsider the timing or scale of the proposed borrowing.
Ultimately, commercial debt advice should not begin with the question, “Which lender will provide the money?”
It should begin with, “What is the client trying to achieve, and how should the debt be structured to support that objective?”
When those questions are answered first, lender selection becomes a more considered and purposeful part of the process.
That is where I believe specialist commercial debt advice can make the greatest difference.
Important information: Commercial finance is subject to lender assessment, eligibility and individual circumstances. Borrowing secured against property or other assets carries risks, including the potential loss of secured assets if repayment obligations are not met. Legal and tax considerations should be reviewed with appropriately qualified advisers.
