Structuring Debt: When Your Funding Stack Isn't Working Anymore

When your funding stack stops working, it often happens subtly and shows up as a set of symptoms that build. Anyone is worth a second look; more than one is a strong signal that a review is overdue.

Structuring debt is the work of deciding how a business's borrowing is put together: what types of facility it uses, in what amounts, at what cost, against what security, under what covenants, and over what maturities. It is not the same as simply borrowing money. Two businesses can owe the same total and yet be in completely different positions. One business can be held back by its structure, the other well served by it. What matters is how the pieces fit the business and each other.

For a scaling UK business, debt is rarely a single loan. It is usually a stack: an invoice finance or asset-based line funding working capital, perhaps a term or cash flow loan layered on top, sometimes legacy government-backed debt, alongside the owners' equity. Good structure is the arrangement of those layers so that the cost is sensible, the security given is proportionate, the covenants reflect how the business actually operates, the maturities do not all fall due at once, and there is headroom to grow.

The single most useful idea to hold onto is alignment. The best structure is the one that matches the shape, the cash flows and the ambitions of the business as it is today. Poor structure is any arrangement where one or more of those have slipped out of line, for example, a term loan doing the job of a revolving facility, or covenants written for a smaller, riskier company than the one that now exists.

The most common reason a stack stops fitting is simple: it was built for an earlier version of the business. The right capital structure at £2m of turnover, raising its first growth facility, looks nothing like the right structure at £15m, refinancing a tired stack. As a business scales, generates more predictable cash flow and builds an asset base, the mix that suited it changes, and a structure that is never revisited drifts out of step with the company it serves.

In practice, this shows up in a few recognisable ways: a facility or lender you have outgrown, whose line cannot scale with revenue; the wrong instrument doing a job it was never designed for, such as a term loan funding a working capital need that an asset-based or invoice line would serve better; or a single facility doing the work that a coordinated blend of facilities should.

The fix is to realign the structure with the stage the business is actually at, usually by reshaping the stack or refinancing into facilities that fit, often replacing one ill-fitting facility with a blend built from the right components. That might mean asset-based lending or a cash flow loan in place of a single stretched line, or working capital and growth capital facilities that match how the business runs. FBX arranges these alongside its refinance work, building the structure the business needs now rather than preserving the shape of the old one.

Two of the most common and most fixable problems are cost and timing.

On cost, the structure may simply be charging more than it should. A business that has strengthened since it borrowed is arguably entitled to a lower margin, but that repricing does not happen on its own, and legacy CBILS or RLS-era debt in particular was often priced for the pandemic period rather than for the business as it is now. Higher base rates have compounded the effect. The reassuring part is that the market has moved in borrowers' favour. Where a business once had a relationship bank and little else, funding now spans clearing banks, challenger and specialist banks, asset-based lenders, private credit and debt funds, and fintech lenders, each with a different appetite and price.

According to the British Business Bank's Small Business Finance Markets report, challenger and specialist banks accounted for 60% of gross SME bank lending in 2025, up from 39% in 2012, with challenger banks and non-bank lenders together providing more than two-thirds of all SME lending. That breadth is exactly why debt that felt fairly priced a couple of years ago may now be well off the pace.

On timing, a facility approaching maturity with no clear plan, or several maturities bunched together, is a problem in its own right. Refinancing ahead of a maturity, from a position of strength, almost always produces better terms than scrambling as the deadline arrives, because lenders price certainty and preparation.

Because an expensive or ill-timed structure usually still functions, the cost of leaving it tends to stay hidden, sometimes for years.

The most direct remedy for both cost and maturity is debt refinancing: replacing the facility, or the whole stack, with new borrowing on better terms. The strongest results come from preparing a clear, well-evidenced case and creating genuine competition between lenders rather than returning by default to the incumbent.

Sometimes the facility itself is fine, and the binding constraint is the financial covenants. Covenant pressure is one of the clearest signs that a structure has drifted, and also the one that frightens people most and needs to be addressed the least.

A covenant breach is technically an event of default, which is what makes it sound alarming. But an event of default gives the lender options rather than forcing a single outcome, and in the UK mid-market lenders very rarely enforce over a breach by an otherwise viable business. The usual outcome, especially where you engage early with a clear explanation and a plan, is a waiver or a reset of the covenant levels.

The useful thing is to diagnose which kind of breach you have. A one-off breach caused by a known, temporary event is a very different conversation from a structural breach that reflects covenants written for a smaller, riskier company than you are now. A one-off is usually resolved with a waiver. A structural problem points to resetting the covenants going forward or, where the facility no longer fits the business at all, refinancing into one whose terms reflect how the company actually operates. A recurring or structural breach is better read not as a sign the business is in trouble, but as a sign the structure is due for a review.

The word "restructuring" carries a distressed connotation that frightens many finance leaders unnecessarily, so it is worth drawing the line clearly, because which side of it you are on determines the kind of help you need.

On the solvent side sits the great majority of mid-market activity: a viable, trading business refinancing or reshaping its debt by agreement with its lenders, with no court involvement and no insolvency process. This is consensual corporate debt restructuring, and there are two broad routes back, which in practice often overlap.

You do not always need a debt advisory and restructuring specialist to put your debt back into shape. A simple, like-for-like renewal with an incumbent that is happy and able to continue is often best handled directly, particularly by a business with a strong in-house treasury or an experienced CFO who keeps current market knowledge and good lender relationships. Where there is no real-time pressure and the requirement sits comfortably within the incumbent's appetite, the case for bringing in a specialist is weak, and an honest adviser will tell you so.

The picture changes when the situation involves complexity, pressure, a transaction, or a genuine need to see across the whole market. Restructuring a stack across several lenders, refinancing under a looming maturity, funding an acquisition that the current structure cannot support, or finding a route after the bank has declined all reward someone who knows the full market and negotiates these deals for a living. The honest test is whether the situation is routine and within your team's reach, or whether it is the kind of thing your team does once every few years while a specialist does it every week.