Structured Finance

Why this guide

Your company is growing. You want to acquire a competitor, finance an industrial project, absorb a working capital requirement that keeps rising with revenue, or simply bring order to a stack of banking facilities negotiated year after year. And you are finding that conventional bank lending no longer keeps pace: amounts too large, an atypical risk profile, unsuitable collateral, or quite simply a single bank that cannot — or will not — carry the transaction.

This is precisely where structured finance comes in. Rather than judging your company on its balance sheet alone, these arrangements are built on what it generates: its future cash flows, its assets, its trade receivables, its contracts. The debt is tailor-made, often by bringing together several lenders — banks, debt funds, investors — each taking on the level of risk it is prepared to bear.

The outcome for the business leader: amounts no single bank would have granted, visibility over several years instead of annual renegotiations, and a financing structure aligned with the growth strategy rather than imposed by circumstance.

What you will find in these pages

• What a structured financing really is;
• The situations that call for it — and the company profile it requires;
• How a transaction is actually built: tranches, security, timeline;
• A real case: the €25m refinancing of a French software company;
• The key success factors, seen from the field.

01. What is a structured financing?

A structured financing is a tailor-made financial arrangement built on the in-depth analysis of assets, future cash flows or specific collateral — not on the company's balance sheet alone. It makes it possible to finance large transactions or those with a particular risk profile (acquisitions, projects, refinancings, stand-alone assets), often by mobilising several lenders or dedicated legal vehicles.

In practical terms, the debt is divided into tranches carrying different levels of risk: senior debt, first in line for repayment and the least expensive; an intermediate tranche with a higher return; and, where relevant, an equity or quasi-equity component, which absorbs most of the risk in exchange for the highest potential return. These tranches may exist together or separately: the combination selected depends on the need, the sponsor, the collateral and the risk level of the file.

The four key instruments to know

The syndicated loan. A large financing granted by a group of banks brought together in a syndicate, under a single agreement. One or more “lead” banks (the arrangers) organise the participation of the other lenders, spread the risk and manage the loan. It is the instrument of choice when the amount exceeds the capacity — or the appetite — of a single bank.

Unitranche financing. A single tranche, provided by a debt fund, replacing the traditional senior debt + junior debt combination. One single counterparty, a tailor-made offer, fast execution. The financing is repayable at maturity (bullet), with quarterly remuneration in the region of Euribor + 5 to 8%, plus capitalised interest where applicable. What you pay for is flexibility and speed.

Mezzanine debt. A “junior” financing, repaid after the senior debt and entirely at maturity. In exchange for this risk, its remuneration is high — 10 to 15% in total, split between quarterly cash interest (Euribor + 5 to 7%), capitalised interest paid at repayment, and sometimes access to the capital through equity warrants. It is used alongside senior debt, to complete an ambitious financing plan.

Asset-backed financing. The debt is secured by identified assets — trade receivables, inventory, real estate, equipment — often placed in a dedicated vehicle (SPV). The lender looks first at the quality of the collateral, which makes it possible to finance companies whose balance sheet alone would not suffice, or to turn a dormant asset into available cash.

What these instruments have in common: the debt is designed around your transaction, not the other way round. That is what makes it a growth lever, not just another banking product.

02. When should you turn to structured finance?

Structured finance is not reserved for large corporates. It is aimed at mature, profitable companies — several years of existence, a proven track record of profitability, most often EBITDA above €1m — facing one of the following situations:

Growth transactions

• External growth: acquisitions, LBOs, business transfers, management buyouts, serial build-ups;
• Project finance: energy, infrastructure, cash-flow-generating industrial projects;
• Complex real estate and transactions beyond the scope of conventional lending.

Financing or refinancing assets

• Working-capital-backed financing: trade receivables, inventory;
• Assets placed in a dedicated vehicle, outside conventional leasing or hire purchase;
• Global refinancing of liabilities fragmented across multiple banking facilities.

Complex situations

• Group structures, holding company (holdco) financing;
• Large amounts or elevated risks, asymmetric risk profiles;
• Distressed situations or tight timelines requiring fast execution.

Who to approach: the right lenders, the right teams

Each type of transaction has its natural lenders — and within each institution, a dedicated team. Knocking on the right door is already half the battle:

A single file may combine several of these players: that is in fact one of the strengths of the structure — each lender takes on the share of risk that matches its strategy.

03. How a transaction is built

Three steps, a timeline of around five months

1. 1

   Structuring.

   The tranche structure (senior, mezzanine, equity) is designed between the company, its advisor and the arranging bank: amounts, maturities, security, and each party's role.

2. 2

   Subscription.

   Each player — incumbent banks, incoming banks, debt funds, investors — subscribes to the tranche matching its risk profile, on the basis of a term sheet drafted by the arranger and submitted to the credit committees.

3. 3

   Drawdown.

   The funds from the various tranches are released at closing to finance the transaction.

The term sheet: the clauses that really matter

The term sheet (TS) sets out the key clauses of the future credit documentation. Four points deserve the business leader's particular attention:

• The financing plan must be perfectly balanced — between needs and resources, but also between equity and debt. As a general rule, expect at least 10% of equity or quasi-equity in the structure;
• Margins per tranche: within a senior debt, the riskiest tranche must not deviate excessively from the others — beyond a 200 to 250 basis point gap, banks walk away;
• Mandatory prepayment events (change of control, excess cash flow) must be carefully circumscribed: in a fast-growing company, a capital raise or a cash surplus must not mechanically trigger acceleration of the debt;
• Security: a bank may refuse to refinance a loan if the security on the historical loan is stronger than that offered in the refinancing. Certain facilities (state-guaranteed loans, EIB-guaranteed loans) may therefore remain outside the scope.

Security: protecting lenders without paralysing the business

Modern structures favour effective but targeted security: a security trust (fiducie-sûreté) over the shares of an SPV holding the trade receivables, pledges, and financial covenants adapted to the business. A coverage ratio may be imposed — for instance, a receivables balance required at all times to represent twice the debt (equivalent to a 50% LTV). The objective: give lenders the security they require, without paralysing operations or mortgaging the strategy.

Two rules of the game to know

• The arranger is always an incumbent bank of the company — never an incoming bank — and generally takes around 20% of the debt on its own books;
• Incoming banks only join the pool if at least one incumbent bank participates in the loan. Your existing banking relationships are therefore a strategic asset of the structure.

04. Real case: refinancing €25m to unlock growth

The company

A French embedded software company, founded some twenty years ago, serving listed multinationals (trade receivables rated “premium” by credit insurers). Revenue: €13m, on its way to €25m; positive operating income. A particular feature of the model: revenue from multi-year contracts is recognised at signing but collected over time — the company can therefore be profitable at operating level yet under pressure on cash. A textbook case where the balance sheet alone tells the story badly.

The problem

Since the launch of its product, the company had financed its working capital bilaterally with close to ten banks: short-term facilities, small amounts, renegotiated every year. In total, more than €20m of fragmented short-term debt — no coordination among lenders, no visibility, and a permanent renewal workload for the CEO and CFO. Against a backdrop of strong growth, this financing model was becoming a brake: the balance sheet had to be structured for the long term.

The need

Refinance €18m of bank debt and add €7m for future working capital, i.e. €25m in a single global loan, on common terms, over 7 years.

The solution selected

Collaboration Capital built a structured loan bringing together the incumbent banks, incoming banks and a private debt fund, supplemented by a strengthening of quasi-equity:

• Tranche A — €10m: amortising bank financing over 6 years (3-month Euribor + 2.50%);
• Tranche B — €4.5m: bullet bank financing over 7 years (3-month Euribor + 3.00%);
• Tranche C — €4.5m: bullet private debt over 7 years (3-month Euribor + 4.50%);
• €5m of bonds redeemable in shares subscribed by the historical financial shareholder.

Main security: a security trust (fiducie-sûreté) over the shares of an SPV holding the trade receivables, with a 200% coverage ratio — the receivables balance being required to remain at all times above twice the debt.

The outcome

Cash flow moving from –€4.2m before the refinancing to +€3.8m and then +€4.2m over the following two years. Seven years of visibility, unified management for the CFO, aligned interests among all lenders — and a management team finally focused on growth rather than on renewing ten banking facilities.

What this file teaches

This shows that even a modest-sized company can secure substantial financing, exceeding its annual revenue.

05. The key success factors

Why work with an advisor

In theory, it is the arranging bank that structures the transaction. In practice, a structured financing only moves forward if someone acts as the conductor: anticipating each step, preparing the SPV's articles of association, having the contracts pledged as security validated with the lawyers, keeping up the pace between the client, the banks and the funds. On a transaction of this kind, that represents an average of seven coordination touchpoints per week over around five months.

It also means staying inside the conversations to protect the transaction itself: detecting in time that one lender is trying to push another out, going back to a lender that had declined, rebalancing the pool. A quality file is not enough — it takes someone whose job is to get it done.

Let's talk about your project

Collaboration Capital advises business leaders across three practices: company acquisitions, company sales, and raising financing from banks, debt funds and family offices — from €1m to €200m. Our approach relies on our own data and artificial intelligence tools to identify the right lenders, at the right time, with the right file.

310 rue Paradis, 13008 Marseille, France • Tel: +33 4 91 48 16 53

Collaboration Capital is registered as an intermediary in banking operations and payment services (IOBSP) with ORIAS under number 25000696 (www.orias.fr). This guide is provided for general information purposes only and constitutes neither an offer nor personalised advice.