The debt model lenders expect to see.
Behind every lender pack sits the model, the workbook from which the IM, the deck and the credit memo all draw their numbers. This page sets the model out part by part, with the specimen’s outputs to download.
A three-statement model built around the debt.
Lenders expect a three-statement model in Excel, properly linked, monthly for at least the first forecast year where the business is seasonal and annual to the end of the plan. On top of the statements it carries the sources and uses, the debt schedules, the covenant tests, liquidity, the breakeven and the scenarios, with the drivers built to flex.
The debt model, part by part.
| Part | The question it answers | What a credit officer checks | Common weakness |
|---|---|---|---|
| Three statements | Does the forecast hang together? | That the statements link, the balance sheet balances and the history ties to the accounts | Statements that do not balance or tie, or drivers hard-coded so a lender cannot flex them |
| Sources and uses | What does the money do at close? | That sources equal uses and the balance sheet bridges from pre-close to pro forma | Opening debt that disagrees with sources and uses |
| Covenant EBITDA | What earnings do the covenants test? | Reported EBITDA plus the permitted adjustments, capped where the facility caps them | Add-backs taken on the borrower’s word, or tests run on the borrower’s own EBITDA definition |
| Debt schedules | How is the debt repaid? | That interest, amortisation, the sweep and any delayed draws run facility by facility from cash the plan generates | Repayments carried by a step-up in growth or margin with no driver behind it |
| Covenant tests | How much headroom is left? | Actual against threshold at every test date, on the facility’s definitions and with the thresholds’ steps | Thresholds held flat where the facility steps them down, which overstates later headroom |
| Liquidity | Does cash clear its floor? | That cash plus the undrawn revolver clears the minimum at every test date, with any gap shown rather than assumed away | A forecast that tops up cash with money nobody has committed |
| Breakeven | How far can earnings fall? | The EBITDA shortfall that breaks the first covenant, re-run through cash and net debt | Static headroom presented as the break-point, which overstates how far earnings can fall |
| Scenarios and the downside bridge | What breaks it, and why? | Each case a full re-forecast, with the move from base to downside attributed to its drivers | A downside that trims revenue but leaves costs, working capital and net debt untouched |
The model is the source of every number in the pack.
Cash, covenants, and a forecast that holds.
The credit officer tests the model for cash and covenants and runs the lender’s own downside through it. A model that breaks when a driver is flexed tells the lender the business does not know its own numbers.
The outputs of one integrated model.
The specimen below shows the outputs of the integrated model behind the pack: the dashboard, the credit statistics, the debt schedules and covenant tests, the scenario comparison and the charts. It runs on the same fictional borrower as the rest of the pack, Northstar Components, a £14.6m refinancing and growth facility, and the IM, the deck and the credit memo quote its figures. No real company, no live mandate, and nothing in it is an offer or advice.
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