When one facility beats a stack.
The trade is precision against simplicity. A layered structure prices each risk separately, which can produce a cheaper blend when the senior market is generous. A unitranche prices everything at one blended margin, closes faster, and removes the intercreditor negotiation entirely, because there is nobody to negotiate with. For an acquisition on a clock, or a borrower who values certainty of execution over the last quarter point, the single facility usually wins.
Leverage is the second argument. Direct lenders will typically hold a unitranche to a higher total multiple than a bank will hold senior debt, which matters most at the smaller end of the market, where the junior layer of a stack is often too narrow to build at all. For many founder-owned businesses the real choice is not unitranche versus a stack; it is unitranche versus less debt.
The counter-argument is concentration. One lender holds the whole structure, so that lender's behaviour in a stress, its appetite for amendments, and its funding stability become single points of dependence. Choosing the counterparty is as much of the decision as choosing the instrument, and it is the part a margin comparison never shows.
What does unitranche cost right now?
For a borrower below $10m of EBITDA, unitranche and senior non-bank debt runs S+550 to 750, or 9.15% to 11.15% all-in at a one-month Term SOFR of 3.65% (SPP Capital Partners, Market At A Glance, July 2026; CME, 4 August 2026). Facilities size to leverage bands of up to 4.00x to 5.50x below $15m of EBITDA (Lincoln International, Private Credit Snapshot, as of 1 May 2026).
Two costs sit outside the margin. Original issue discount on new-issue unitranche below $20m of EBITDA prices at 98.0 to 99.0 (Houlihan Lokey, as of 30 April 2026), with lower-middle-market facilities quoted at 2% to 3% at funding, and call protection commonly runs 102 in year one and 101 in year two before par (ABF Journal, 1 June 2026). A borrower who expects to refinance early is buying an option against itself.
The full comparison against a layered senior-plus-junior structure, held at constant leverage, is maintained in the linked positions below.
How a unitranche process runs.
It is a private negotiation, not a syndication. A defined shortlist of direct lenders is approached in parallel with the same materials, which is what creates tension in a market with no public price. The revolver bank, where one is needed, is run alongside rather than after, with the split of collateral agreed before documentation rather than during it.
Underwriting concentrates on the earnings definition. Because the facility sizes and tests off adjusted EBITDA, the definition of that term, the adjustments allowed into it, and the caps on them carry more economic weight than the margin. The same is true of the covenant package: a unitranche typically carries fewer covenants than a bank structure, and the ones it carries are therefore negotiated harder.
Documentation is bespoke. There is no standard unitranche agreement, so provisions on call protection, delayed-draw mechanics, incremental capacity, and transferability vary lender by lender and draft by draft. The drafting is a workstream, and the borrower who treats it as boilerplate signs terms it never priced.
What direct lenders test.
Coverage under a downside case before anything else: whether the business services the whole blended coupon through a bad year, cash interest first. Because the facility replaces what would otherwise be two tranches, the coupon is larger than a senior facility's, and the coverage question is correspondingly harder.
The quality of the adjusted earnings, second, and with particular force, since every sizing and testing mechanism in the document keys off it. Adjustments survive when they are documented, non-recurring in fact rather than label, and reconciled adjustment by adjustment to reported results.
Then the exit: how the facility is refinanced or repaid at maturity, and what the business must look like for that to happen. A lender holding the entire structure has no senior lender above it to share the downside, and it underwrites accordingly.