Incremental facility

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

// THE SHORT ANSWER

An incremental facility is a provision in a leveraged loan agreement that lets the borrower add new term loans or revolving commitments under the same agreement and security, up to a capacity set in the document, usually a fixed amount plus whatever keeps leverage under an agreed ratio. As with an accordion, existing lenders are not committed to provide it. They usually protect themselves with a most-favoured-nation clause: if new term debt is priced more than an agreed cushion above theirs, their own margin rises until the gap is no wider than the cushion. The terms that matter are how capacity is measured and what the protection leaves out.

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.