What a lender's credit committee actually asks for
Your relationship manager is not the decision maker. They are the person who has to defend your proposal in a room you will never enter, to people who have never met you.
That distinction explains most of what feels arbitrary about corporate lending. The questions that come back are rarely the relationship manager's own doubts. They are the questions they expect to be asked upstairs, and they are asking you early so they are not caught out.
Which means a submission has one job beyond being accurate: it has to make your case easy for someone else to argue on your behalf.
The questions behind the questions
Almost every query on a term loan proposal reduces to one of these.
| The question | What they are testing | What answers it |
|---|---|---|
| Can they service this? | Debt service coverage across the full tenor, not the average | Year-by-year DSCR including the worst year, with the assumptions behind it stated |
| What if they are wrong? | Whether the case survives a downside | A sensitivity table: revenue down 15%, margin down 200 basis points, a delayed commissioning date |
| Where does repayment come from? | Cash generation, not profit | A cash flow statement showing operating cash after working capital movement and maintenance capex |
| Is this the whole picture? | Group exposure, related parties, contingent liabilities | A group structure chart, related-party summary and guarantees given, volunteered rather than extracted |
| Do the numbers reconcile? | Whether projections connect to audited history | A bridge from the last audited year to year one of the projection, explaining each step |
| How have they behaved? | Conduct on existing facilities | Clean account conduct, no delayed statutory dues, and any past irregularity explained before it is found |
Notice that none of these is about how good the business is. A committee is not deciding whether your company is impressive. It is deciding whether it will be repaid.
The three things that send a proposal back
1. Projections with no visible arithmetic
A model where revenue grows 22 per cent a year because that is what was typed in will not survive. Growth has to decompose into things a committee can test: volume and price, or capacity and utilisation, or customers and average order value. If the drivers are not visible, the number is an assertion.
2. A working capital assumption that does not move
Projections that hold receivables and inventory at a constant number of days while revenue doubles are the most common single error, and experienced credit analysts look for it first. Growth consumes working capital. A model that does not show it consuming cash is understating the funding requirement, which means the facility being requested may be the wrong size.
3. Surprises found rather than disclosed
A related-party transaction, a guarantee given to a group company, a tax dispute, a covenant breach two years ago. Every one of these is survivable when disclosed up front with an explanation. None of them is survivable when the committee's own diligence turns it up after you presented a clean picture. The issue stops being the fact and becomes your credibility.
What a well-prepared submission contains
- Three years of audited financials, with any qualification explained in a covering note
- An integrated model — profit and loss, balance sheet and cash flow linked, not three separate sheets
- Year-by-year DSCR and the covenant headroom at each point
- A sensitivity table with at least three downside cases
- Explicit working capital assumptions, in days, with the basis for each
- Group structure, related-party transactions and contingent liabilities
- Security offered, with valuations and the basis of valuation
- A one-page summary a committee member can read in ninety seconds
That last item does more work than the rest combined. Somebody has to summarise your proposal for the room. If you have not written that summary, they will write it for you, and it will be shorter and less favourable than yours.
What it changes
Preparation does not turn a weak proposal into a strong one, and it should not. What it changes is speed and terms: fewer rounds of queries, a shorter path to sanction, and a materially better position on pricing and covenants because you are negotiating from a position of having answered the questions before they were asked.
Common questions
What DSCR do lenders want to see?
For Indian term lending, a projected debt service coverage ratio around 1.5 times is a common comfort level, with covenants often set near 1.2 to 1.25 times. What matters more than the headline figure is the ratio in your worst projected year and whether it survives a sensible downside case. A proposal averaging 1.8 times but dipping to 1.05 in year three will be questioned hard.
How long does a term loan sanction take in India?
From a complete submission, typically six to sixteen weeks depending on the size of the facility and how many approval layers sit above the relationship manager. Most of the delay is not credit assessment; it is waiting for information the borrower did not supply first time. A well-prepared pack is the single biggest determinant of speed.
Do we need a rating before we approach a lender?
For facilities above the threshold at which risk weighting bites, an external rating materially affects pricing, and preparing for the rating exercise is much the same work as preparing for the credit committee. It is usually sensible to do both together rather than sequentially.
Before you submit
If you are preparing to approach lenders, a conversation before the pack goes in is worth more than one after the queries come back.