Amortization: how term loans pay down, and where to negotiate
Term Loan A amortizes evenly, Term Loan B is mostly bullet with cash sweeps: the levers that decide how fast a deal deleverages.
Expect Term Loan A to amortize evenly over ~5–7 years while Term Loan B remains largely bullet with nominal (often ~1%–5% a year) mandatory paydown plus excess-cash-flow (ECF) sweeps, the key levers that accelerate deleveraging when cash generation is strong. Draft these carefully alongside covenants and builder baskets.
Next steps
- Negotiate lower ECF sweep tiers once net leverage passes set hurdles.
- Model optional prepayments versus growth capex to maximize equity IRR.
- Favor springing ECF triggers tied to cash conversion or working-capital metrics for seasonal businesses.
Informational content only. Not investment advice.