Growth capex (expansion capex)

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED 2026-11-06

// THE SHORT ANSWER

Growth capex is capital spending that adds capacity, products or sites a business does not yet have, as distinct from maintenance capex, which keeps existing capacity working. A lender treats it as discretionary: its own free cash flow deducts only maintenance capex, some covenant definitions deduct only capex paid from the business's own cash rather than from new debt or equity, and a capex covenant may cap it. The earnings it should produce usually arrive months or years after the cash leaves, so debt rises before EBITDA does. The label is the borrower's, so a lender tests the split rather than accepting it.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.