Debt repayment schedule in Spain - Some insights?

searcher profile

September 11, 2024

by a searcher from IESE Business School in Madrid, España

Dear network,

We're progressing with a potential deal and wonder if our proposed debt repayment schedule is too aggressive (to the bank) or is usually achievable. Could someone please share their experience on this?

Thank you all!

Our proposed debt repayment schedule is: 2025 6% 2026 10% 2027 14% 2028 18% 2029 22% 2030 30%

0
9
77
Replies
9
commentor profile
Reply by a searcher
from IESE Business School in Madrid, España
Thanks Alejandro. Just want to give some visibility on this as I had a meeting with a couple banks: - If you are buying an SME company in Spain with a New-Co or a company with no track record, the bank will put you through LBO financing. Indeed, they will only finance 5-6 years with a relatively linear plan, as mentioned by alejandro. - But, if you’re buying that same company and can put some collateral (such as property), the deal may be redirected to corporate financing, and the conditions are much more flexible. The timeline may be extended up to 8-12 years and repayment schedule can pushed back. Just wanted to share these data points! Have a great week!
commentor profile
Reply by a searcher
from IESE Business School in Barcelona, Spain
Hi Pablo,
In my experience banks (I'm talking about BBVA and Sabadell mostly) provide up to 10 years loan for businesses in case the operation is acceptable for them.
So your repayment schedule is not aggressive at all, the only thing you would need to negotiatie is the deferred payment of the first year, as you plan to pay only 6% of the debt instead of 10%, (i.e. you defer the principal payments 6 months and you only pay interests).
If I were you I'd go for 10 years and negotiate 0% comission for early repayments, in the ideal world you can fulfill your repayment plan, but you have flexibility in case something goes south.
commentor profile
+7 more replies.
Join the discussion