• Juanita Schwartzkopf

How to Ensure a Successful Refinance Process


Focus Management Group - Refinance process

Once the 2020 results have been evaluated, many lenders are asking borrowers to refinance. This discussion may quickly become heated, with both parties finding difficulty working together.


Most borrowers initially believe they will be able to quickly find a refinance option on their own, and they underestimate the amount of time and effort needed throughout the detailed process of closing the refinance.


How do you make sure the refinance process is as simple and painless as possible?

What is a successful refinance process?


The companies that are able to be successfully refinanced use a firm that understands the credit process and the refinance process. The Focus Management Group process has been successful because we know how to evaluate a company’s strengths and weaknesses, and match that to potential lenders. We guide the parties through the process and make sure everything that can be done to make a refinance possible is completed accurately and timely.


First, we evaluate the borrower’s performance and collateral. We use that information to identify the borrower’s positives or strengths. We assess the weaknesses, and know how to mitigate the negatives. For example, for one company the strength may be its collateral, and even though performance problems existed the company may still generate sufficient EBITDA to service debt based on that collateral. In another situation a company may have turned the corner on performance but needs a period of time with higher advance rates on working assets for a short period of time.


We use the analysis of strengths to prepare a short teaser outlining the deal points – the amount requested, term or line, potential collateral, and basic performance data.


The next step is dual path. We prepare a confidential information memo (“CIM”) to provide the information a lender needs to make its credit decision. We also prepare the data room for potential lenders and populate it with the information lenders typically require, plus what assists in underscoring the strengths of the company. In addition to the CIM and the dataroom, we begin to assemble the list of potential lenders – both firms and individuals at the firms.


During this part of the process, we establish a clear timeline that everyone – incumbent lender, borrower, and FMG – agree to and are prepared to be measured against. We find that a clear timeline also helps the potential new lenders focus on assessing their interest quickly.


Once the CIM is completed and the data room is established, we begin the process of going to the market with the refinance opportunity. We start with a first wave of potential lenders, who receive the teaser (which does not have the name of the company), and work with the lenders to complete NDAs to protect the company’s information. Once the NDA is signed, the data room is opened to the potential lenders.


Typically, we ask for a response back from potential lenders in two to three weeks. During this period of time we field questions from the potential lenders and compile and answer additional information requests. The potential lenders are dealing with FMG at this point and are working toward providing an Indication of Interest (“IOI”). As we receive feedback from the initial wave, we add more lenders to the potential lender pool.


As the IOI’s are received FMG summarizes key points and prepares an analysis of terms and costs for the company to review. During discussions between FMG and the company, a short list of IOI issuers is identified for the next step in the process. This could be anywhere from two to six lenders. We encourage borrowers to select a variety of types of lenders to enable receipt of multiple deal structures.


The next step is to set up in person or virtual meetings between the company and the selected potential lenders. This allows the company to develop its opinion of the potential lenders, and to begin to foster a relationship with the lender who will eventually complete the refinance.


At this point, the potential lenders may adjust their initial IOI with different terms or may prepare a more formal term sheet. Again, FMG prepares an analysis of the term sheets and continues to monitor and update the analysis.


Once the updated term sheets have been received after the in person or virtual meetings, the company selects one or two lenders to begin the due diligence process. This process may include additional site visits, field exams, appraisals, etc.


During the due diligence process there will be additional questions and information requests that we work with the company to provide. We prefer to have legal run concurrently, and we work with the company and its legal counsel to ensure a thorough understanding of the term sheet converted to documentation. There is always a flurry of activity as the closing date nears and we conduct daily meetings with the new lender and the company in the two weeks leading up to the close. This ensures everyone understands the open items and is focused on completing them.


Throughout the process, FMG provides a weekly update to the company and to the incumbent lender. This weekly update includes the timeline to the refinance, the steps completed to date, a list of all lenders contacted, and the current status of the refinance. We track which lenders are in the data room, which lenders have passed, and which lenders have provided IOIs or term sheets. The weekly update keeps everyone focused on the timeline and allows adjustments if needed.

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The refinance process runs more smoothly if the team assisting the borrower knows how to analyze credits and identify deal structures.


At FMG, our team of professionals has commercial banking and investment banking backgrounds. In addition to our ability to assist companies in evaluating and improving their performance, we are also able to evaluate companies and assess how they might be able to develop a new lending relationship.

Data-driven financial analysis and a defined process are what differentiates Focus Management Group from others.