What does bank senior debt cost right now?
For a borrower below $10m of EBITDA, senior commercial bank cash flow debt runs S+350 to 425, or 7.15% to 7.90% all-in at a one-month Term SOFR of 3.65% (SPP Capital Partners, Market At A Glance, July 2026; CME, 4 August 2026). Senior leverage for that cohort clears at 2.00x to 2.50x of EBITDA; above $25m of EBITDA the senior band widens to 4.25x to 5.25x (SPP, July 2026).
Those bands have tightened, not loosened: a year earlier the sub-$10m cohort cleared half a turn more senior debt (SPP, July 2026). The practical consequence is that many borrowers who last raised a facility three years ago are carrying assumptions about capacity that the current market will not honour, and discovering that mid-process is expensive.
The structural backdrop matters for strategy: banks have spent a decade ceding term-lending share to direct lenders while keeping the revolver and the relationship. What that shift means for a borrower weighing both is covered, with sources, in the linked positions below.
What does the credit committee actually test?
Coverage, not leverage. The committee's first question is whether the business can service the debt through a bad year, which is why fixed-charge and cash interest coverage under a downside case matter more than the headline multiple. Then the quality of earnings: how much of adjusted EBITDA is real and repeatable, and how much is adjustment. Then concentration, collateral, and the refinancing path. Leverage is the last of those, not the first.
A bank also underwrites things no term sheet mentions: the depth of management, the reliability of reporting, and how the last facility was operated. A clean compliance history is an asset most borrowers never think to present. The preparation that answers these questions before they are asked is most of what an advisor changes about the outcome.
What is actually negotiable in a bank term sheet?
More than the margin, and usually worth more than the margin. The earnings definition and the adjustments allowed into it set every ratio in the document. Covenant levels and cushions decide whether an ordinary bad quarter becomes a formal event. Amortization and cash-sweep mechanics determine how much of the cash flow the business keeps in a good year. Permitted-debt and permitted-lien baskets decide what flexibility survives for the next transaction.
The negotiating position comes from the process, not the request. A bank pricing against a live alternative moves on terms it would not concede bilaterally, and the borrower does not need many alternatives: it needs real ones, prepared to the same standard, arriving on the same timetable.
When is bank debt the wrong answer?
When the credit needs explaining rather than presenting. A business with a complicated year, heavy adjustments, a concentration issue, or a use of proceeds outside the ordinary will often clear a bank committee slowly or not at all, while a direct lender prices the same story in weeks. The bank facility is cheaper per dollar and narrower per situation, and the honest comparison prices both.
It is also the wrong sole answer where capacity is the constraint. Bank senior debt stops at the bands above; transactions that need more funding reach for a unitranche or a junior tranche, each covered on its own page. The common structure keeps the bank where it is strongest, the revolver and the operating relationship, and sources term capital where the capacity is.