Start with the settlement, not the headline.

The useful question is not simply “how much will they lend?” It is “what will be left after this transaction closes?” A gross facility and freely available cash are different quantities. The bridge between them should be visible before you decide whether an offer solves the problem.

This paper uses a deliberately simple, hypothetical refinancing. It is a demonstration of the method, not a description of a Sasines transaction or a lender's terms. Every input is exposed in the accompanying workbook.

Suppose the gross facility is $5 million. From it, this example deducts a 2% establishment fee, six months of retained interest at a simple 12% annual rate, $25,000 of transaction costs and a $4 million existing-debt payout. That leaves $575,000 of usable proceeds, not $5 million. Inspect the settlement bridge →

Separate what is borrowed from what is received.

“Gross” is the starting facility amount in this model. “Net before payout” is what remains after the model's funded fees, retained interest and transaction costs. “Usable proceeds” is what remains after the existing debt is also paid out. Those labels are definitions for this example; a real lender's documents must be checked on their own terms.

The model deducts $100,000 of establishment fees, $300,000 of retained interest and $25,000 of transaction costs. Net proceeds before the existing-debt payout are therefore $4,575,000. The next subtraction—the $4 million payout—is what brings the cash available to the business down to $575,000.

Do not count the payout twice. If an offer already states proceeds after discharge, subtracting the existing debt again understates available capital. If it states proceeds before discharge, ignoring the payout does the opposite. Put each amount on a separate row and state exactly what it includes. See the definitions beside the figures →

Retained interest consumes capacity too.

In this example, interest is reserved from the gross facility at settlement. The calculation is $5 million × 12% × 6/12 = $300,000. The borrower does not receive that amount as freely usable cash.

That calculation is a modelling assumption, not a universal lending convention. A different rate base, drawdown pattern, term, payment arrangement or contractual treatment changes the result. The question is which mechanism the actual documents require, and where it sits in the cash bridge. Inspect the interest formula →

Changing the label from “interest” to “reserve” does not make the deduction disappear. Equally, an amount payable later should not automatically be treated as a settlement deduction. Timing belongs in the model as well as amount.

Make the assumptions inspectable.

ASIC has identified fee transparency and inconsistent terminology among concerns in the private-credit sector. That supports the importance of clear disclosure; it does not validate the hypothetical pricing used here. Keep the regulator's observation separate from the model's assumptions. Read the attributed source note →

For an actual proposal, the working file should identify where each figure came from: the dated offer, payout statement, fee quotation or other applicable document. An estimated payout is not a current payout statement. An indicative facility is not an unconditional commitment.

If a figure is unresolved, name it. A range or explicitly missing input is more useful than a precise total built on an unexplained guess. The reader should be able to follow a conclusion back through the arithmetic to the underlying document.

Does it solve the problem?

The final comparison is between usable proceeds and the cash requirement—not between the face value of the facility and that requirement. If the business needs more than $575,000 after settlement, this hypothetical structure does not cover it as modelled.

This is deliberately not a complete credit assessment. Security value, priority, conditions precedent, serviceability, exit, tax and legal treatment are outside the example. There is no implied approval, lender availability or recommended transaction.

The small discipline is the useful one: define the terms, expose the deductions, and inspect the remaining capital. The workbook is there so you can check the argument, not merely take the headline on trust. Return to the workbook →