Debt Capital $1–10M for SMEs — What Passes Credit and What Dies
Debt Capital $1–10M for SMEs — What Passes Credit and What Dies
If you’re asking for $1–10 million, banks and private lenders read the same way: numbers first, story second. Cash flow, collateral, and control decide everything. Below is a plain-English field guide to what actually closes, what it costs, and the minimum you need to bring so credit says “yes.”
Which structure fits your facts
| Structure | Typical Size / Tenor | When it works | Watch-outs |
|---|---|---|---|
| Cash-Flow Term Loan(senior secured) | $1–10M • 2–5 yrs • amortizing or bullet | Stable EBITDA, recurring demand, sensible leverage | DSCR > 1.25x; personal/limited recourse common under $5M |
| Borrowing Base Revolver (ABL) | $1–10M • 12–36 mo • revolving | Clean AR aging, defined ineligibles, tight collections control | Weekly/monthly BBCs, lockbox, field exams, reserves |
| Equipment Term Loan/ sale-leaseback | $0.5–8M • 2–5 yrs • amortizing | Hard assets with resale value; VIN/serials verifiable | Appraisals, maintenance covenants, title perfection |
| Owner-Occupied CRE(term or bridge) | $1–10M • 3–10 yrs | Business uses the property; predictable occupancy | DSCR & debt yield rules apply; environmental is decisive |
| Guarantee-Backed Loan(partial credit guarantee) | $2–10M • matches loan tenor | Strong business, light collateral; guarantor covers 80–90% | Guarantor fee, indemnity, lien map, real sponsor equity |
Indicative Term Sheet — SME Debt $1–10M
| Item | Range / Term | Notes |
|---|---|---|
| Facility type | Term loan, revolver (ABL), equipment loan, or hybrid | Chosen against cash flow predictability and collateral |
| Size | USD 1,000,000 – 10,000,000 (typical) | Upper end by collateral quality and EBITDA depth |
| Pricing (all-in) | Benchmark + 2.50%–6.50% (senior); ABL often lower; asset-light higher | Credit, tenor, collateral, and reporting drive the band |
| Amortization | Term: straight-line or cash sweep; ABL: interest-only revolving | Sweeps tied to excess cash or borrowing base cures |
| Advance rates (ABL/equipment) | AR: 70%–90% eligible; Inventory: 25%–60%; Equipment: up to 70% FMV | Ineligibles, reserves, and appraisals apply |
| Covenants | DSCR 1.20x–1.50x; Net leverage 2.0x–3.5x; Min liquidity tests | Borrowing base tests for ABL; springing sweeps on misses |
| Security & liens | All-assets lien (UCC) or specific collateral; guarantees as needed | Intercreditor if multiple lenders/guarantors exist |
| Conditions precedent | KYC/AML cleared, documents executed, perfection complete, insurance in place | Field exam/inspection where relevant |
| Reporting | Monthly management accounts; quarterly compliance cert.; BBCs per cycle | Audited annuals where available |
| Prepayment | Make-whole or step-down fee 0%–2% typical | Negotiated by tenor and margin |
Bare minimum to be taken seriously
- Numbers that reconcile: revenue and margin history, AR/AP agings that tie to the GL, and tax filings that match.
- Cash flow with a cushion: underwritten DSCR at or above the floor after interest, fees, and any reserves. No wishful thinking.
- Collateral that’s clean: title searches done, liens mapped, UCCs ready to be released or subordinated.
- Sponsors with skin in the game: personal/limited guarantees are common under $5M; pure non-recourse is rare for SMEs.
- Reporting cadence: monthly management accounts on time, every time — or expect covenants to tighten.
Deal killers we see weekly
- EBITDA built on pro forma “someday” margins with no evidence.
- AR full of disputes, offsets, or customers who never pay on time.
- Inventory without controls, insurance, or realistic aging assumptions.
- “All-assets lien” promised while half the assets are already pledged.
- Silence on tax arrears or contingent liabilities until the last minute.
Documents that move a file to “approved”
- 2–3 years audited/reviewed financials; YTD management accounts with prior-year comps.
- AR/AP agings, top customers list with terms and limits; collections history by obligor.
- Borrowing base methodology (if ABL), sales pipeline or backlog support.
- Corporate docs, ownership chart, resolutions; KYC for directors and beneficial owners.
- Insurance schedule; for equipment/CRE: appraisals, serial lists, environmental, survey, zoning.
Timeline — clean vs messy
- Week 0–1: intake, quick sizing, indicative terms.
- Week 1–3: underwriting, Q&A, field/desktop exams if ABL, drafts issued.
- Week 3–6: CPs cleared, liens perfected, insurance set, docs signed.
Add time for legacy liens, tax issues, or disputed receivables.
How we help
We lead the credit work, map the right structure, and place the debt with lenders that will actually sign. That means building a defensible model, drafting a borrowing base that won’t fall apart, fixing lien and document gaps, and setting covenants you can live with. All placements are subject to underwriting and final credit approval.
Ready to see if your ask clears credit?
Send financials, AR/AP agings, collateral map, and use of proceeds. We’ll size the deal, flag risks, and propose a structure that can close.
Review My Debt OptionsInformational only. Terms vary by sector, collateral, and credit profile. Any financing depends on lender approval, KYC/AML, documentation, and perfection of security interests.
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