Short answer: Private credit lenders need evidence that a family-owned company can repay the proposed loan even if there is weaker performance. Before issuing meaningful indicative terms, they need financial information they can reconcile and a clear account of who controls the business and its cash. The finance team's job is to make that case testable.
A non-bank lender has asked for accounts, a forecast and a management meeting. Your audit is complete, but the monthly figures differ. The founder owns the factory personally. You need to explain how these arrangements affect repayment.
This guide helps family-owned companies prepare for that discussion. It covers Southeast Asia and India. It also covers Benelux and DACH. Agree the work with your lender; requirements vary. If the borrowing decision is still open, start with the companion guide to institutional debt for a family business.
First establish what the lender means by “terms”
Ask how firm the offer will be so you know whether you can plan around it. An early proposal may still depend on detailed checks. Even an approved loan can have conditions to meet before you receive the money.
| Decision stage | Information to prepare | What to establish with the lender |
|---|---|---|
| Initial fit and indicative terms | The borrowing request, recent accounts and repayment forecast. Explain who owns the company and what it already owes. | Which assumptions could change the offer? |
| Underwritten proposal or commitment | Evidence supporting the forecast and answers to the lender's detailed checks | What approvals remain? Which promises are binding, and until when? |
| Closing and drawdown | Signed documents and proof that funding conditions are met | Who confirms the conditions are met? When can funds be used? |
Keep a list of unresolved conditions. Ask counsel which obligations already bind you, especially costs if the deal stops. An indicative term sheet alone does not establish a funding date.
Build one pre-terms pack that reconciles
Give the lender a pack whose numbers agree, so it can assess repayment without rebuilding your accounts. Aim for three financial years, recent monthly results and a monthly forecast. Explain any missing records.
| Lender question | Evidence and reconciliation | Accountable owner |
|---|---|---|
| What exactly are we financing? | Show where the money goes and when. Include fees and cash the business must retain. Match this to the forecast. | CFO, with board approval of the request |
| Can we rely on the historical earnings? | Annual accounts, audit reports and monthly results. Explain differences between statutory and management figures, including the last twelve months. | Financial controller |
| Which earnings adjustments are supportable? | Explain each change to reported EBITDA. Attach evidence and distinguish proposed adjustments from those the lender accepts. | CFO and controller |
| Where does profit turn into cash? | Show overdue invoices and cash tied up in stock. Explain major cash payments and any bank balance you cannot use. | Controller and treasury lead |
| Does the plan survive weaker trading? | Show monthly cash after loan payments under the base and downside cases. Start from the actual balance sheet. | FP&A lead, reviewed by CFO |
| Who already has a claim on assets or cash? | List each loan and lease, with repayment dates. Identify pledged assets and guarantees. Match balances to lender statements. | Treasury lead, with counsel |
| What depends on the family? | Show ownership and family payments. Identify essential assets held personally, such as the factory. | CFO, company secretary and owners |
| How durable is the operating case? | Show which customers support forecast sales. Explain key supplier dependencies and whether capacity can meet demand. | CEO and commercial/operations leads |
Use one reporting date. Show each company's results alongside the group total because cash may not move freely between them. Label estimates and explain totals that do not yet agree.
For example, the audit may include an expense that the monthly report left out. Show that difference in a short bridge between the two figures. Carry the correction into the forecast rather than leaving the lender to decide which version to use.
Explain every earnings adjustment before it reaches the model
Explain why each removed expense will stop, so the lender can judge whether earnings will hold up. If the founder leaves, someone may need to replace them on a market salary. Rent paid to the family still costs money if the factory is needed.
Attach the original expense record and evidence of what will change. Explain any replacement cost. Alehar's adjusted EBITDA guide explains how adjustments affect the earnings figure.
Keep three columns: reported earnings, management's adjustments and the lender's accepted figure. Mark the last provisional until discussed. A cost saving in an approved budget is still an assumption until supported.
Build the forecast around cash that can reach the borrower
Show how much cash the borrower has each month so seasonal shortages are visible. Extend the forecast through final repayment. Add a rolling 13-week cash forecast if cash is tight. Keep the original budget beside actual results and explain misses. If the forecast shows a shortfall after a bank limit cut, use the guide to replacing a working-capital line before peak season.
Explain what supports forecast sales. Separate signed orders from cancellable orders and hoped-for business. Model when customers pay and when suppliers need paying. For example, buying stock for a new order can leave less cash for loan payments that month.
Test a specific delay, such as a major customer paying after the loan installment falls due. Show whether the company can still pay staff and suppliers. If it needs an unused credit line, check that the line will actually be available then. Do not assume a lender will extend it.
Model each loan separately, including the proposed borrowing:
- When does cash arrive, and what fees reduce it?
- How is interest calculated, and is it paid or added to debt?
- When is principal repaid, including the final balance?
Count lease payments once. Show owner distributions separately. Exclude family support that has not been committed.
If a holding company borrows, explain how subsidiary cash reaches it after taxes and approvals. Exclude cash it cannot access. Money in a subsidiary's bank account may be unavailable when the parent owes interest.
A fictional example: The adjustments and cash bridge change the discussion
Fictional Alder Components shows how an earnings adjustment and slower collections change repayment capacity. This simplified example is not a lending benchmark. Its assumptions and figures are below.
| Assumption or output | Management case | Review/downside case |
|---|---|---|
| Basis and units | One hypothetical forecast year, in EUR millions, for the same borrower entity. No acquisition, FX movement or restricted cash. Annual totals hide intra-year seasonality. | |
| EBITDA before proposed adjustment | 5.00 | 5.00 before downside; 4.50 after a 0.50 operating reduction |
| Owner-pay add-back proposed / accepted for illustration | 0.50 proposed | 0.20 accepted; 0.30 retained for replacement management cost |
| Adjusted EBITDA | 5.50 | 4.70 |
| Cash taxes | 0.70 | 0.60 |
| Maintenance capex | 0.80 | 0.80 |
| Increase in operating working capital | 0.40 | 0.90, including 0.50 additional cash tied up in collections/inventory |
| Other cash items | Operating rent already included in EBITDA. No other leases or growth capex. No cash adjustments, financing fees or tax gross-up. | |
| Cash available for debt service: EBITDA less taxes, maintenance capex and working-capital increase | 3.60 | 2.40 |
| Total existing and proposed debt service | 2.60: cash interest 1.40 plus scheduled principal 1.20; unchanged between cases; no PIK or bullet repayment in this year | |
| Illustrative debt-service coverage | 3.60 / 2.60 = 1.38x | 2.40 / 2.60 = 0.92x |
| Cash remaining before owner distributions | 1.00 | (0.20) |
| Requested owner distribution, outside debt service | 0.60 | 0.60 |
| Cash remaining after requested distribution | 0.40 | (0.80) |
| Liquidity assumptions | Opening unrestricted cash equals the minimum operating buffer. No committed undrawn line or additional owner contribution. Negative residual cash therefore requires action. |
The review case cannot cover loan payments from the year's cash. Stopping distributions reduces the deficit but does not remove it. Test a smaller loan or slower principal repayments. Any new owner capital must be committed. Put each remedy into the monthly model.
The guide to sizing an affordable debt facility also considers existing debt and collateral. For an initial estimate, use the Debt Capacity Calculator:
These tools cover selected markets. Their estimates are not lender approval.
Make the family cash arrangements explicit
Write down what the company pays the family so the lender can see which payments will continue. Record who receives each payment and why. Include unpaid commitments and arrangements where no fee is charged.
Where IFRS applies, IAS 24 requires related-party disclosures, including outstanding commitments. Have your advisers review the register against the applicable accounting and legal requirements.
- Shareholder loans: agree balances with owners. Show when they expect repayment and whether the new lender would require them to wait.
- Family-owned premises or intellectual property: provide the lease or license. Show when access could end. Do not offer someone else's asset as collateral without permission.
- Owner payments: separate operating costs from distributions. Name who can change them and show what the forecast assumes.
- Personal support: distinguish a signed commitment from willingness to help. Do not count family wealth as company cash.
- Control and continuity: show who owns and runs the business. Explain any planned share transfers and who takes over if the founder is unavailable.
Have owners approve the factual register. Explain unresolved disagreements and how they affect the forecast.
Turn regional questions into assigned diligence work
Assign local checks early so a borrowing restriction does not derail the plan later. Give counsel and tax advisers the proposed borrower, lender and use of funds. The table identifies issues to resolve, not legal conclusions.
| Region | Questions and files for the proposed financing |
|---|---|
| Southeast Asia | Which country receives the loan? Can cash cross borders to repay it? Show the currency mismatch if customers pay locally but debt is in foreign currency. |
| India | Can this lender fund the intended use? Identify existing bank permissions needed. Explain differences between audited figures and management accounts. |
| Benelux | Treat Belgium, the Netherlands and Luxembourg separately. If the parent borrows, show how operating companies can send it cash. |
| DACH | Treat Germany, Austria and Switzerland separately. Identify who can pledge company assets. Swiss tax treatment needs its own assessment. |
Tax can reduce cash available for repayment. Singapore's IRAS lists interest and loan-related fees paid to nonresident companies among payments subject to withholding tax. Exceptions and treaties may change the result. The EU Anti-Tax Avoidance Directive includes an interest-limitation measure; national rules determine its application. Sources checked September 9, 2026. Neither treatment applies universally.
Use the management meeting to test the pack
Rehearse the meeting so management can explain the forecast without relying on the CFO for every answer. Keep the presentation focused on the borrowing request and repayment case. Link each financial slide to its supporting schedule.
Practice answering these questions:
- Which customers and contracts support next year's growth, and what happens if the largest renewal slips?
- Why did the previous forecast miss, and what changed in the current assumptions?
- Which capex can be delayed without reducing the revenue or capacity assumed in the model?
- How much cash remains in the weakest month, after every existing facility payment?
- Which family payments would continue during the downside, and who has authority to change them?
- What principal remains at maturity if refinancing is unavailable?
The CEO explains the business; the CFO explains repayment. Owners explain their support. Log unanswered questions and assign a response date. Keep one Q&A record so lenders receive consistent information.
Organize diligence so someone else can follow the numbers
Organize the files so a reviewer can find the evidence behind a number. Separate accounts from forecasts and legal documents. Give each file a clear period and owner. Link model inputs to the source files.
Share summaries first under confidentiality arrangements. Restrict access to sensitive files, such as customer contracts. Explain redactions and provide a way to check the underlying information. Disclose material credit problems.
Use the same reporting date and definitions throughout. Before accepting reporting deadlines, produce a trial pack:
- Actual results against budget, with explanations
- Updated cash forecast and loan balances
- Covenant calculations and material events
Alehar's debt covenant guide explains why the agreed definitions matter.
Agree the scope and timing of independent reports before commissioning them. Establish who pays and whether the lender can rely on the work.
When the finance team needs more capacity
Assign help where reporting still depends on the CFO rebuilding answers, so lender work does not delay the monthly close. Ask a colleague to trace a presentation figure to its source. Gaps show where preparation is needed.
Alehar's Corporate Finance as a Service helps keep reporting current and prepare the numbers lenders need. We can help reconcile accounts and build the repayment model, then organize the supporting evidence. To discuss preparation, contact us with your reporting pack, debt schedule and target timetable.
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Get in TouchThis article is provided for general information only and does not constitute legal, tax, investment, accounting or other professional advice. The views expressed are those of the author. Information from third-party sources has not been independently verified. Please consult your own professional advisers before acting on this content.
