Covenant headroom
The number on the certificate isn't the whole story
A covenant test passing on paper doesn't automatically mean there's real headroom to borrow more against it. Headroom depends on which covenant is binding (leverage, interest cover, a minimum EBITDA), how close the last test came to the threshold, and whether the trend is improving or eroding. A business that passed comfortably last quarter but is trending toward the line has less real headroom than the certificate alone suggests, and that's usually the actual conversation a lender wants to have before agreeing anything new.
Releasing security
A release has to be agreed, not assumed
Security gets released when it's no longer required (an asset is sold, a facility is repaid, or a lender agrees a partial release), but it isn't automatic. Satisfying a charge covers how a discharged charge actually gets removed from the register once the debt is repaid. A partial release (freeing one asset while a facility continues against the rest) is a negotiated variation, not a formality, and usually needs the lender's explicit agreement in writing before the asset can be sold or refinanced elsewhere.
Something that catches businesses out: assuming a charge falls away once the original purpose is served. A charge stays on the register, and stays binding, until it's formally satisfied or released, whatever the practical circumstances have become in the meantime.
Which group company should borrow
The borrower should match where the security sits
In a group structure, the entity that actually signs for a facility matters beyond who happens to hold the bank relationship. It affects which entity's assets sit behind the security, how the debt shows on which set of accounts, and whether a guarantee from another group company is needed to make the numbers work for the lender. Group Card Structures covers the equivalent question for day-to-day spend. The same logic applies to a larger facility: match the borrowing entity to where the asset or cash flow the lender is actually looking at sits.
Is switching worth it
Switching costs come before the saving
Switching facility or lender has a real cost before it has a benefit. There are valuation and legal fees, the operational disruption of moving banking relationships and, if there's an existing debenture, the priority and consent questions Debenture Borrowing covers. A rate saving that looks attractive on paper can be smaller than the switching cost once those are counted in, particularly on a facility with meaningful time left to run.
Decision helper
Alternatives and limitations
None of these four is a self-serve decision. Each depends on the specific facility documentation and the lender's own position, not a general rule this page can settle. What it's for is knowing which of the four questions is actually live before that conversation happens.
