Peak debt
What is peak debt?
ONE OF 80 TERMS · FREE · NO SIGNUP
BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED
// THE SHORT ANSWER
Peak debt is the highest the borrowing reaches over the life of a facility or a season — on a development loan, usually just before the first sales settle; on a seasonal line, when the stock has been bought and not yet sold. Lenders size limits, security and interest reserves against the peak, not the average, because the peak is when the bank is most exposed and the project or season least proven. A forecast that understates the peak is a common reason a facility runs out before the plan does.
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.
// WORKED IN
// NEXT TO IT
- 5 Cs of credit
- Cash conversion cycle
- Working capital facility
- Quality of earnings
- Debtor days
- Borrowing base
- Covenant headroom
- Second way out
- Personal guarantee release
- Customer concentration
- Multi-currency facility
- Bankability
- Commitment fee
- Clean-down
- Self-liquidating
- Balloon payment
- Amortisation
- Debt service cover ratio (DSCR)
- Interest cover ratio
- Debt to EBITDA (leverage)
- Dilution (receivables)
- Advance rate
- Hardcore (overdraft)
- Loan to cost (LTC)
- Presales
- Standstill agreement
- Break cost
- Expected loss
- Dividend payout ratio
- Debt per kgMS
- Fixed charge cover ratio (FCCR)
- Global cash flow
- Interest reserve
- General security agreement (GSA)
- Negative pledge
- Condition precedent (CP)
- Event of default
- Covenant waiver
- Reservation of rights
- Watch list
- Risk grade
- Loan loss provision
- Going concern
- Management accounts
- Term-out
- Subordination
- Intercreditor agreement
- Club facility
- Unsecured lending
- Loan to value ratio (LVR)
- Forced-sale value
- Related-party transactions
- Capitalised costs
- Quantity surveyor (QS)
- Retention (construction)
- Cash sweep
- Finance lease
- Adjusted EBITDA
- Interest rate swap
- Forward exchange contract
- Maturity transformation
- Risk-weighted assets
- Net interest margin
- Credit cycle
- Yield curve
- Transaction exposure
- Information barrier
- Conflict of interest
- Material non-public information
- Tipping off
- Suitability
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