A small business guide to: super senior revolving credit facilities

If you’re running a growing business with solid financials, your needs might have outgrown basic overdrafts and standard business loans. But you still might not be ready for the complexity of investment banking or capital markets financing either. That’s where super senior revolving credit facilities come in.

A super senior revolving credit facility (RCF) is a flexible credit line that sits at the top of your company’s debt structure. Unlike a regular loan, you can withdraw, repay, and redraw funds as and when you need to. And unlike standard credit facilities, lenders get paid first if things go wrong – which translates into better terms for you.

Super senior RCFs aren’t suitable for every business. You’ll typically need annual EBITDA (earnings before interest, taxes, depreciation and amortisation) above £1 million and borrowing requirements between £10-50 million. But if you’re in that bracket, a super senior RCF could provide the flexible working capital that supports your growth, acquisition, or restructuring needs.

In this article, we’ll explain how super senior RCFs work, help you determine if your business is suitable, and guide you through the application process.

Key points:

• Super senior RCFs offer flexible funding with priority repayment status for mid-sized businesses

• Eligibility typically requires at least £1 million EBITDA and £10-50 million of borrowing needs

• Funding Options by Tide can connect you with specialist lenders offering these advanced facilities

What is a super senior revolving credit facility?

A super senior revolving credit facility (RCF) is a type of financing that’s often used in corporate finance.

It’s a bit like an overdraft with a very high limit (often in the millions), except you only pay interest on what you actually use and the lender gets paid back before anyone else if your business runs into trouble.

It may sound complicated, but it’s simple when you break it down:

• Revolving credit facility (RCF): This is the ‘overdraft’ part of the financing – called a ‘line of credit’. There’s a limit (eg £20 million) that you can withdraw from and pay back when you need to.

• Super senior: This is an agreement between your business and the lender that says that, should your business get into any financial difficulties, you’ll pay back the credit facility debt before other types of debt.

A super senior RCF is achieved using what’s called an ‘intercreditor agreement’ – a type of contract that establishes the priority order of lender repayments. The super senior RCF sits first on the list, followed by other senior debt, then subordinated debt , and finally equity holders.

Because super senior RCF lenders are first in line for repayments, they typically offer more attractive terms such as lower interest rates than other types of finance. For example, you might pay 3-5% interest on a super senior facility versus 7-9% on subordinated debt like unsecured loans. For a £20 million facility, the difference could be as much as £800,000 per year in interest savings.

The super senior RCF is generally offered as part of a broader finance package, with the different components serving different purposes. For example, a company may secure a £15 million super senior RCF alongside a £35 million loan, creating a £50 million total financing package.

Super senior RCFs are often used for:

• Leveraged buyouts: Where a private equity firm acquires a company that has a lot of debt

• Corporate restructuring: Where businesses need access to funding while they reorganise their finances and debt arrangements

• Unitranche financing: For medium-sized companies that need a single, flexible loan combining both senior and subordinated debt

Is a super senior RCF suitable for your business?

Super senior RCFs aren’t the right choice for every business. They’re designed for companies that have outgrown standard bank offerings but aren’t yet large enough for capital markets financing (eg issuing bonds or shares on public markets).

For example, Canary Wharf Group secured a £100 million sustainability-linked super senior RCF in 2022, PizzaExpress included a £30 million super senior RCF in their 2020 restructuring, and Matalan also put a £25 million super senior RCF in place as part of its refinancing in 2020. Three big businesses borrowing big amounts of money…

Typical eligibility profile:

• Annual EBITDA of at least £1 million

• Borrowing requirements between £10-50 million

• Assets or cash flow to support secured lending

• A track record that demonstrates you can manage complex financing arrangements

Business scenarios where a super senior RCF can make sense:

• Acquisition financing: You’re buying another company and need flexible funding to cover costs like integrating systems, hiring employees, and managing changes to working capital

• Growth capital: You’re expanding quickly and need funding that won’t disappear when you need it most

• Refinancing existing debt: You’re replacing multiple debt facilities with a cleaner structure and better terms

• Restructuring support: Your business needs guaranteed access to funds while working through operational or financial challenges

• Seasonal or cyclical businesses: You need large working capital facilities to manage predictable fluctuations in cash flow

What about smaller businesses?

Super senior RCFs are designed more for larger businesses rather than startups and smaller SMEs.

If you need to borrow less than £10 million or your EBITDA is less than £1 million, you’ll probably find more suitable options with standard secured business loans or regular revolving credit facilities.

Benefits and risks

As with all financial products, you’ll want to weigh up the benefits and risks when considering whether a super senior RCF is right for your business.

Benefits:

• Lower interest rates: Because the lender gets priority repayment status, they typically offer rates around 2-4 percentage points lower than subordinated debt – potentially saving hundreds of thousands of pounds per year

• Flexible access to funds: Withdraw and repay as you need, only paying interest on the amounts you actually use (ideal for businesses with variable working capital requirements)

• Committed funding: Unlike overdrafts that banks can withdraw, super senior RCFs provide committed funding that remains available even during difficult trading periods

• Strategic flexibility: It can support major business decisions like acquisitions or expansion without worrying about available funding

Risks:

• Complexity and costs: Higher arrangement fees (typically 1-2% of facility size), more legal documentation and ongoing compliance requirements can cost more than simpler alternatives

• Asset security requirements: Your business assets (eg property, equipment and stock) secure the RCF, meaning your lender can sell these if you default on the repayments

• Restrictive covenants: RCFs can include financial and operational restrictions, which could limit business decisions like acquisitions, dividend payments, or additional borrowing without the lender’s consent

• Limited lender pool: Fewer lenders offer super senior RCFs, potentially reducing your negotiating power and limiting your options if you need to refinance later on

Applying for a super senior revolving credit facility

Securing a super senior RCF is more complex than most other types of business lending. But the process is relatively standardised between specialist lenders.

1. Prepare your documentation: You’ll usually need three years of audited accounts, detailed business plans, financial projections, and information about existing debt facilities

2. Engage professional advisors: Appoint corporate finance advisors to arrange introductions and legal advisors to handle documentation (this can cost around 0.5-1.5% of the RCF size)

3. Submit initial application: Present your business case, financial information and funding requirements to potential lenders

4. Credit assessment: Lenders will review your application, conduct due diligence and provide an initial credit approval (expect to wait around 4-8 weeks)

5. Term sheet negotiation: Agree key terms including facility size, interest rates, fees and covenants

6. Legal documentation: Complete intercreditor agreements, security documentation, and facility agreements (add around 2-4 weeks for this)

7. Completion and drawdown: Sign the final documents, register security, and access your super senior RCF

The whole process should take around 6-12 weeks, from the initial application to being able to access the funds (assuming complete documentation and no major complications).

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Checking if you’re eligible is free, only takes a few minutes, and while a full application would impact your personal or business credit score, checking eligibility won’t. Just submit your details via the link below to find out if you could be eligible to borrow up to £20 million. 

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FAQs

How much does a super senior RCF typically cost compared to a standard business loan?

Super senior RCFs are usually cheaper than standard business loans due to their priority payback status, with total annual costs (including fees) often around 3-6%. You’ll only pay interest on what you use, making them a flexible and potentially cost-effective option for businesses whose funding needs fluctuate.

What happens to my existing debt if I take out a super senior facility?

Your existing debt doesn’t go away if you take out a super senior facility, but the order in which your debts are repaid will change. The super senior RCF will get paid back before existing debt if there’s a problem. Because of this, your current lenders usually need to agree to the new arrangement by signing intercreditor agreements.

You could use the super senior RCF to refinance or pay off some of your existing debt. But it’s important that your legal advisor checks your current loan agreements to make sure adding a super senior facility doesn’t break any rules or terms you’ve already agreed to.

Can I use this funding for day-to-day expenses or is it only for major investments?

Super senior RCFs are typically used for working capital, so day-to-day expenses are usually permitted. But most RCFs include restrictions on what you can and can’t use the funding for.

You generally can’t use the money for dividend payments, acquisitions without consent, or speculative investments. Essentially, your use should support normal business operations or agreed strategic plans.

What assets can be used as security, and what are the risks to my business?

Most business assets (eg property, equipment, inventory, and intellectual property) can be used as security for super senior RCFs. So if your business defaults on the loan, the lender can take and sell these assets to recover the money you owe.

Usually, this security is limited to business assets. But your personal assets could be at risk if you provided a personal guarantee. Lenders will typically require asset valuations and regular updates. And they may take legal control over your business bank accounts, giving them the power to manage your cash flows if you fail to meet your repayment obligations.

Do I need legal advice? What should I look out for in the terms?

Yes, you should definitely get independent legal advice before entering into these types of financing arrangements – it’s complex and can have a major impact on your business.

Pay particular attention to the financial covenants (which set out what could cause a default), any restrictions on how you run your business, the situations in which lenders can demand repayment, and the rules around refinancing or selling your business.

Don’t just rely on the lender’s documents, either. Your own lawyer should review everything and explain what it all means. Their legal fees might be around 0.1-0.3% of the super senior RCF amount, but this can be a worthwhile investment for the protection and peace of mind it can provide.

Please note that the information above is not intended to be financial advice. You should seek independent financial advice before making any decisions about your financial future.

It’s important to remember that all loans and credit agreements come with risks. These risks include non-payment and late-payment of the agreed repayment plan, which could affect your business credit score and impact your ability to find future funding. Always read the terms and conditions of every loan or credit agreement before you proceed. Contact us for support if you ever face difficulties making your repayments.

Funding Options, now part of Tide, helps UK firms access business finance, working directly with businesses and their trusted advisors. Funding Options are a credit broker and do not provide loans directly. All finance and quotes are subject to status and income. Applicants must be aged 18 and over and terms and conditions apply. Guarantees and Indemnities may be required. Funding Options can introduce applicants to a number of providers based on the applicants' circumstances and creditworthiness. Funding Options will receive a commission or finder’s fee for effecting such finance introductions.