How to Explain a Borrower's Repayment Capacity in English

A lending discussion ultimately needs to answer a simple question: how will the debt be repaid? Strong English connects repayment to cash generation, timing, debt service and downside resilience.

Identify the primary repayment source

• “The primary source of repayment is operating cash flow.”
• “The term loan will be repaid from cash generated by the underlying business.”
• “Repayment depends partly on proceeds from the asset sale.”
• “The facility is expected to be refinanced at maturity.”

If repayment depends on refinancing or an asset sale, state that clearly rather than describing it as ordinary operating repayment.

Describe capacity

• “The borrower demonstrates adequate capacity to service the proposed debt.”
• “Debt-service capacity remains strong under the base case.”
• “Coverage is tighter than last year but remains acceptable.”
• “The current cash flow provides limited capacity for additional debt.”

Explain the drivers

• “Repayment capacity is supported by stable recurring cash flow.”
• “The main constraint is the higher interest burden.”
• “Capacity has improved following the reduction in debt.”
• “The business benefits from relatively low maintenance capex.”

Discuss downside resilience

• “Under the downside case, the borrower can still meet scheduled debt service.”
• “A 15% decline in EBITDA would materially reduce coverage.”
• “The downside case indicates limited headroom.”
• “The company would need to reduce capex if earnings weakened significantly.”

Distinguish ability from willingness

In credit discussions, repayment analysis may include both financial capacity and broader credit considerations. Keep the sentence focused on what the evidence shows.

• “The financial capacity to repay appears strong.”
• “The group has a long track record of meeting its obligations.”

Talk about refinancing risk

• “A significant portion of the debt matures in 2028.”
• “The repayment profile creates a refinancing requirement at maturity.”
• “Refinancing risk is reduced by the company’s strong liquidity and market access.”
• “We would prefer a clearer deleveraging path before maturity.”

A concise credit explanation

“The primary source of repayment is operating cash flow. Under our base case, free cash flow is sufficient to cover scheduled interest and principal repayments with reasonable headroom. The downside case is tighter, particularly if EBITDA falls by more than 15%, but the borrower has flexibility to reduce discretionary capex. The main residual risk is the bullet maturity in 2029, which creates a refinancing requirement.”

Useful phrases

• primary / secondary source of repayment
• debt-service capacity
• scheduled repayment
• cash available for debt service
• coverage remains adequate
• limited headroom
• bullet maturity
• refinancing requirement
• downside resilience
• deleveraging path

The best answer is structured around the cash: where it comes from, whether it covers the debt service, what happens in a weaker scenario, and what risk remains at maturity.