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Raising capital · 8 min read
Your first ninety days after a debt raise: a practical plan
Winning a sanction is the middle of the process, not the end. Here is how to spend the first few weeks and months so the facility runs smoothly.
Raising capital · 8 min read
Winning a sanction is the middle of the process, not the end. Here is how to spend the first few weeks and months so the facility runs smoothly.
The first ninety days after a sanction decide whether a new facility becomes a quiet, useful tool or a source of friction. In the first few weeks you finish documentation and meet the conditions set by the lender. In the middle weeks you draw the money for its stated purpose. By the end you should have a reporting rhythm, a compliance calendar and a clear view of your repayment dates.
Many borrowers relax once the sanction letter arrives. That is understandable, but it is exactly when avoidable mistakes begin: missed conditions, funds used for the wrong purpose, late statements. This plan walks through the period in order, so nothing is left to memory.
A sanction letter is an offer with conditions. Before any money moves, the lender needs signed loan agreements, security documents, board or partner resolutions and proof that the conditions it listed have been met. These are often called conditions precedent, meaning things that must happen before the first drawdown.
Start by listing every condition in the sanction letter in a simple sheet. Beside each, write who is responsible, what evidence will be shown and by when. Typical items include creation of security, insurance cover, registration of charges, a no-objection letter from an existing lender, or a promoter contribution brought in before the lender releases its share.
Read the draft agreements against the sanction letter line by line. Terms should match what was offered. If a clause differs, such as a covenant, a fee or a repayment date, raise it now and ask for it to be corrected in writing. After signing, the discussion becomes much harder.
Keep one master file
Keep one folder, physical or digital, holding the sanction letter, every signed agreement, resolutions, receipts for fees and insurance policies. Months later, when someone asks what was agreed, you will answer in minutes rather than days.
Funds are released either in one go or in stages, depending on the facility. A term loan for a project is often released in tranches linked to progress, while a working capital limit becomes available for use once documents are complete. Check the current terms with your lender on how each drawdown is requested and what supporting papers it needs.
The most important discipline here is purpose. The sanction states what the money is for, and lenders may check this through invoices, payment trails or site visits. Pay suppliers and contractors directly from the loan account where the lender asks for it, and keep invoices that tie every payment to the approved purpose.
If the plan changes, for example a machine costs more than expected or a vendor changes, tell the lender before spending, not after. A short written request is far better received than an explanation of a deviation that has already happened.
If your term loan carries a moratorium, the period during which only interest or nothing is payable, do not mistake it for free time. Interest may still accumulate, and the first full instalment will arrive on a fixed date. Put that date in your calendar on day one and plan the cash for it from the project or business, not from fresh borrowing.
Facilities come with obligations that repeat. Typically these include periodic stock statements for working capital limits, financial statements at agreed intervals, insurance renewals, and intimation of certain changes such as a new director, a new address or additional borrowing. Your sanction letter and agreements list the exact set. Check them rather than assume.
Build a compliance calendar that covers the whole life of the facility, not only the next month. Each entry should show the obligation, the due date, the person who prepares it and the person who checks it. A calendar owned by one person who then goes on leave is a common weak point, so name a backup.
| Column | What to record |
|---|---|
| Obligation | The statement, renewal or intimation required |
| Due point | The date or event that triggers it |
| Owner and backup | Who prepares it and who checks it |
| Evidence | Where the submitted copy is stored |
Also agree with your accountant on how monthly books will be closed. Lenders trust numbers that reconcile, and a lender who sees tidy, timely statements from the start tends to be easier to deal with when you later need a change or an additional limit.
Lenders track a handful of measures, and you should track the same ones before they ask. Common examples include the ratio of total debt to equity, the ability of operating cash flow to cover instalments and interest, and, for revolving limits, how much of the limit is used against the drawing power available. Ask your lender which measures are written into the agreement as covenants, meaning promised thresholds, and keep a running view of where you stand.
Do this monthly. If a measure drifts toward its limit, the time to talk is early, with an explanation and a plan, not after a breach has been reported by the lender's own system. Lenders generally respond better to a borrower who raises a concern first.
Pay attention to repayment behaviour as well. A missed or bounced instalment shows up in your credit record and in the lender's classification of the account, and it can affect your ability to raise anything further. Keep enough balance in the repayment account a few days ahead of each due date.
Do not let small slips pile up
A late statement, an expired insurance policy or an unreported change may look minor, but several together make a lender doubt your control over the business. Fix small slips quickly and note the reason in writing.
Within the first few months, many lenders hold a review, either through a visit, a call or a request for updated numbers. Treat it as an opportunity. Prepare a short note covering how the funds were used, how the business has performed against the plan you submitted, what has changed since, and what you expect over the next period.
Be candid about shortfalls. If sales are slower than projected or a customer has delayed payment, say so, with the steps you are taking. A lender who hears about a problem from you, with a plan, tends to treat it as a management issue. A lender who discovers it alone may treat it as a risk issue.
Use the review to ask practical questions too: how renewals will work, what information the lender would like to see earlier, and whether any condition could be relaxed as a track record builds. Do not expect promises, but the answers tell you how the relationship will run.
A raise does not end at sanction, and the habits you set in this window tend to last for the life of the facility. If you want a second pair of eyes on your documentation, drawdown plan or reporting calendar, Lalsar Capital can review your case.
Questions
No. A sanction is an offer with conditions, and funds are normally released only after agreements are signed, security is created and the listed conditions are met. Using other money in anticipation and expecting reimbursement can create problems. Ask the lender what proof it needs for the first drawdown and plan your cash around the actual release date.
Raise it before signing. Point to the clause, quote the sanction letter, and ask for a corrected draft in writing. Lenders sometimes use standard forms that need adjusting. After signing, the signed document generally governs, so correction is far easier at the draft stage.
Only with the lender's agreement. Funds are sanctioned for a stated purpose, and a different use can breach the terms. If circumstances change, write to the lender early, explain the reason and ask for permission before you spend.
It varies with the type and size of the facility and the lender's own policies. Many lenders ask for periodic statements and carry out a formal review at set intervals. Check your sanction letter and agreements, and ask your lender what to expect.
Speak to the lender before the due date, explain the reason and propose a realistic plan. Do not wait for the account to be flagged. Early conversations leave more options open than late ones, though no outcome can be promised.
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