Extended capital-markets CFO
Use a dated cash-flow comparison built from net funds received and all required payments. Then compare restrictions, repayment risk and asset rights separately. A lower coupon can still be the more expensive or less useful proposal once fees, amortization, reserves, exit costs and final payments are included.
Normalize the starting point
Use the same net funding need and closing date. Record gross proceeds, discounts, fees, existing debt payoffs and restricted cash separately. A proposal that withholds a reserve does not provide the same usable liquidity as one that advances the full amount. Show the reserve's eventual release if supported.
Model the full payment path
Include interest or rent, principal repayment, ongoing fees, mandatory reserves and final obligations. Calculate the cash-flow yield where appropriate and present total cash paid, but do not rely on a single metric. Different repayment speeds and retained asset value can make otherwise similar rates misleading.
Market reference: ELFA: questions to ask before financing equipment; ELFA: lease and loan comparison.
Run an exit case as well as a hold case
Model keeping the financing to maturity and exiting at the date management might sell, refinance or relocate. Include contractual prepayment amounts and estimated transaction costs. For fixed-rate institutional debt, obtain the actual prepayment language rather than assuming a free exit because the borrower's credit has improved.
Market reference: PGIM: private placement debt.
Turn the model into a decision
Keep estimated items visibly separate from quoted terms. List the differences the model cannot price reliably: consent rights, covenants, reporting, guarantees and operating flexibility. A recommendation should say which option fits the business, what could change that answer and which open terms must be resolved before commitment.
Illustrative example, not a client result
The decision in practice
Illustrative arithmetic, not a financing quote: saving 1% annually on a constant $10 million balance equals $100,000 before costs. A $250,000 refinancing cost implies 2.5 years of simple payback before amortization, taxes and timing. If the loan will be repaid in one year, that headline spread saving is not enough.
What to prepare
- Full term sheets and dated payment schedules
- Payoff quotes and exit provisions
- Expected holding period, discount-rate assumption and operating constraints
For an initial conversation, a summary is enough. Share private materials only through an agreed channel.
Common questions
Is simple payback enough?
No. It is an initial screen. A decision needs the actual payment timing, remaining balances, exit costs and relevant tax effects.
Can we compare fixed and floating offers?
Yes, using explicit rate scenarios and any hedge cost. Do not present an assumed future floating rate as a known saving.
Sources and further reading
- ELFA: questions to ask before financing equipment
- ELFA: lease and loan comparison
- PGIM: private placement debt
Our decision framework is CFO Signals analysis. External references describe market practices and products, not an endorsement, partnership or available offer. Terms and eligibility require confirmation for your transaction.