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Corporate banking

M&A and corporate finance glossary: 59 entries in English and Polish

M&A and corporate finance glossary: corporate banking

M&A and corporate finance glossary

The entries in this section deal with how banks finance companies. They cover types of loans, the loan agreement and its provisions, covenants and events of default, security, interest and fees, as well as guarantees, letters of credit, cash pooling, and interest rate and currency hedging.

Prepared by the Capital One Advisers team. Entries last reviewed: November 12, 2026.

Entries from A to Z (59):

Acquisition loan

Polish: kredyt akwizycyjny

An acquisition loan is a loan that finances the purchase of shares in another company or of its business. The borrower is often the buyer’s special purpose vehicle, and repayment usually comes from dividends paid by the acquired company or, after a merger, from its cash flow, so the bank analyzes that company’s ability to service the debt after the deal. Security usually includes a pledge over the acquired shares and security over the target’s assets, subject to the financial assistance rules for joint-stock companies (Article 345 of the Polish Commercial Companies Code, KSH) and the ban on payments to shareholders from a limited liability company’s assets needed to fully cover its share capital (Article 189 § 2 KSH). The loan agreement contains extensive covenants and conditions precedent to drawdown.

See also: covenants, intercreditor agreement, refinancing, commitment letter, bridge loan.

Bank guarantee

Polish: gwarancja bankowa

Under Article 81 of the Polish Banking Law, a bank guarantee is a unilateral undertaking by the guarantor bank to pay the beneficiary a specified amount once the beneficiary meets the payment conditions, which may be evidenced by documents attached to the demand. A bank guarantee must be issued in writing, or it is void. Common types include payment, performance, advance payment, and bid guarantees. A guarantee is an independent obligation. Under an on-demand guarantee, the bank generally checks only whether the demand meets the guarantee’s terms and does not resolve the parties’ dispute under the underlying contract. Not to be confused with a surety.

See also: trade finance, documentary letter of credit, suretyship.

Banking secrecy

Polish: tajemnica bankowa

Under Article 104 of the Polish Banking Law, banking secrecy is the duty of a bank, its employees, and the persons through whom it performs banking activities to keep confidential all information about a banking activity obtained during negotiations and the conclusion and performance of the agreement. The bank may disclose such information only in cases provided for by law, for example when the client authorizes the bank, in writing or electronically, to pass specified information to a named recipient (Article 104(3)), or at the request of authorized bodies. Banks share information on clients’ debt through institutions set up under Article 105(4) of the Banking Law, including the Polish Credit Information Bureau (BIK). In due diligence, the target itself provides data on its loans.

See also: creditworthiness, legal due diligence.

Beneficial owner and KYC

Polish: beneficjent rzeczywisty i KYC

A beneficial owner is a natural person who directly or indirectly controls a client or on whose behalf a business relationship is established or an occasional transaction is carried out; in a company, it is usually a person who holds more than 25% of the shares or votes or exercises control in another way, and if, despite documented efforts, no such person can be identified or there are doubts about that person’s identity, and no money laundering or terrorist financing is suspected, a person in a senior management position. KYC (know your customer) is the procedure in which a bank identifies the client and its beneficial owners and verifies their identity, assesses the purpose and intended nature of the business relationship, monitors it on an ongoing basis, and, where the circumstances require, examines the source of funds, under the Polish Act on Counteracting Money Laundering and Terrorist Financing. Companies subject to the duty, which excludes among others public companies, report their beneficial owners to the Central Register of Beneficial Owners (CRBR). Incomplete KYC documentation delays account opening and loan disbursement.

See also: loan agreement, legal due diligence.

Blank promissory note

Polish: weksel in blanco

A blank promissory note is a promissory note, in banking usually issued by the debtor, for example the borrower, that is signed but deliberately left incomplete, usually without the amount and the payment date. In banking practice, it comes with a note completion agreement (deklaracja wekslowa) in which the maker authorizes the bank to complete it on agreed terms if the loan is not repaid. A third party, for example a shareholder, can secure the note with an aval, a guarantee of payment of the note. For the creditor, the advantage is fast recovery of the claim in order-for-payment proceedings. A blank promissory note also secures the claims of Bank Gospodarstwa Krajowego (BGK) against the borrower for payments made under a de minimis guarantee.

See also: loan security package; public loan guarantees, BGK; suretyship.

Bridge loan

Polish: kredyt pomostowy

A bridge loan is a short-term loan that provides financing until a permanent source becomes available, such as proceeds from a share or bond issue, a grant, an asset sale, or a long-term loan. In an M&A deal, the buyer may finance the purchase price with a bridge loan and then repay it with an issue of securities or a long-term loan. A bridge loan usually carries a higher interest rate or fees that rise over time, which encourages early repayment. The main risk is that the permanent financing is not in place when the bridge loan falls due.

See also: acquisition loan, refinancing, loan prepayment.

Capital expenditure loan, capex loan

Polish: kredyt inwestycyjny

A capital expenditure (capex) loan is a loan that finances a specific investment project, such as purchasing machinery, constructing a plant, or modernizing existing facilities, usually with a term of several years to more than a decade. The bank typically requires the borrower to contribute its own funds and checks whether the company’s cash flow, including cash flow from the new investment, will cover debt service, often using the DSCR. It disburses the funds in a single payment or in tranches, for example against invoices or confirmation of progress. Principal repayment often starts after a grace period, and the financed assets usually secure the loan.

See also: debt service coverage ratio, DSCR; loan security package.

More in the article “Four routes to capital. Why decisions made two or three years earlier determine how a mid-sized company is financed”.

Cash pooling

Polish: cash pooling

Cash pooling is a bank service in which the account balances of companies in one corporate group are managed together so that the surpluses of some companies cover the shortfalls of others. In physical (zero-balancing) cash pooling, funds are actually transferred between the participants’ accounts and the account of the lead company, which creates intragroup receivables and payables. In notional cash pooling, positive and negative balances are offset only for interest calculation, without transfers between accounts. Cash pooling can reduce interest costs and the group’s need for external financing, but settlements must comply with transfer pricing rules. When a company is sold, it usually leaves the seller group’s cash pool.

See also: net working capital, NWC; multi-purpose credit line; split payment mechanism.

Cash sweep

Polish: spłata z nadwyżki środków pieniężnych

A cash sweep is the obligation to use a share of the borrower’s excess cash flow, as defined in the agreement and remaining after debt service and agreed expenditure, to prepay the loan. The agreement defines excess cash flow and the share that goes to the bank. That share often falls as net debt to EBITDA declines. The mechanism is typically used in acquisition loans and project finance to reduce debt faster. It also indirectly reduces the cash available for dividends.

See also: loan prepayment, acquisition loan, project finance, net debt to EBITDA.

Comfort letter

Polish: list patronacki

A comfort letter is a statement by a parent company addressed to a bank that finances its subsidiary, in which the parent declares, for example, that it will keep its stake in the subsidiary or support its liquidity. It is used when the parent wants to support its subsidiary’s financing without providing a suretyship or guarantee. Polish law does not regulate comfort letters, so their legal effect depends on the wording. A soft comfort letter contains only assurances, while a hard comfort letter may include an undertaking to provide the subsidiary with funds to repay the loan.

See also: bank guarantee, loan security package.

Not to be confused with: suretyship.

Commitment letter

Polish: promesa kredytowa

A commitment letter is a bank’s written undertaking to grant a loan on specified terms if the applicant meets the conditions set out in it by a set date. It is usually issued after a positive credit decision, and the bank may charge a fee for it. In an M&A deal, the buyer shows the commitment letter to the seller as evidence that the bank has committed, subject to conditions, to finance the purchase price. Commitment letters are also required in some public tenders. A binding commitment differs from an indicative offer, which only outlines possible terms and does not oblige the bank to lend.

See also: acquisition loan, binding offer.

Compliance certificate

Polish: certyfikat zgodności

A compliance certificate is a document that the borrower periodically gives the bank, usually together with its financial statements, to confirm that it meets the financial covenants in the loan agreement. It includes the ratio calculations, for example net debt to EBITDA or DSCR, and a statement that no event of default is continuing, or a description of any default and the steps taken to remedy it. Members of the management board usually sign it, and the agreement may require an auditor to confirm the calculations. Failing to deliver the certificate on time or giving false information in it is usually an event of default.

See also: covenants; event of default; net debt to EBITDA; debt service coverage ratio, DSCR.

Conditions precedent to drawdown

Polish: warunki uruchomienia kredytu

Conditions precedent to drawdown are the requirements in a loan agreement that the borrower must meet before the bank pays out the first or any later funds. In LMA-based documentation, they are called conditions precedent. They usually include delivery of corporate documents and consents, signing the security agreements and filing applications to register them, payment of the equity contribution, legal opinions, and confirmation that no event of default has occurred. In acquisition financing, they must be satisfied in time for the deal to close, so the buyer seeks to keep them to a minimum to obtain certain funds. Not to be confused with the conditions precedent in a share purchase agreement.

See also: loan agreement, commitment letter, loan security package.

Not to be confused with: conditions precedent, CPs.

Covenants

Polish: kowenanty

Covenants are undertakings of a borrower or a bond issuer in a loan agreement or in the terms and conditions of a bond issue, a breach of which is usually an event of default. Financial covenants set permitted levels of ratios such as net debt to EBITDA, DSCR, or ICR, usually tested quarterly or semiannually. Non-financial covenants require specific actions, such as delivering financial statements to the bank and maintaining asset insurance, or prohibit actions without the bank’s consent, such as asset disposals, dividend payments, or additional borrowing. When a covenant may be breached, the borrower asks the bank for a waiver.

See also: net debt to EBITDA; debt service coverage ratio, DSCR; acquisition loan; event of default; negative pledge; waiver; compliance certificate; change of control clause.

Credit margin and floating interest rate

Polish: marża kredytowa i oprocentowanie zmienne

The floating interest rate on a loan consists of a reference rate, such as 3M WIBOR or POLSTR, and the credit margin, a component agreed in the loan agreement. Term WIBOR is usually fixed in advance for each interest period, while compounded POLSTR rates are calculated from past overnight values. The margin reflects the borrower’s risk, the quality of the security, and the bank’s costs. The agreement may provide for a margin that depends on net debt to EBITDA and falls as that ratio declines. The borrower can limit the risk of rising rates with an interest rate swap (IRS).

See also: reference rate, WIBOR, POLSTR; loan fees, upfront fee, commitment fee; interest rate swap, IRS; cost of debt.

Creditworthiness

Polish: zdolność kredytowa

Under Article 70 of the Polish Banking Law, creditworthiness is the ability to repay a loan with interest on the dates set in the agreement. The bank generally makes the loan conditional on it and may request the documents needed to assess it. Exceptionally, it may lend to a borrower without creditworthiness that provides a special form of security for repayment and a recovery plan which, in the bank’s assessment, will restore its creditworthiness within a set period (Article 70(2)). For a company, the bank looks mainly at cash flow, debt, profitability, and the quality of management, and the result feeds into its internal rating and the margin. It also checks the credit history, for example with the Polish Credit Information Bureau (BIK). Loss of creditworthiness generally allows the bank to reduce the loan amount or terminate the agreement, subject to the limits in Article 75 of the Banking Law and in the Restructuring Law.

See also: loan agreement; debt service coverage ratio, DSCR; net debt to EBITDA; banking secrecy.

Cross-default clause

Polish: klauzula cross-default

A cross-default clause is a provision in a loan agreement or in bond terms and conditions under which a default by the borrower, the issuer, or a group company under another financing agreement, usually above a set amount, is also an event of default under this agreement or bond issue. It protects the creditor from having to wait for a breach of its own terms when a default has already occurred under another financing agreement. The borrower negotiates thresholds, cure periods, and limiting the clause to financial indebtedness. A narrower version is cross-acceleration, which applies only once other debt has been accelerated.

See also: event of default, covenants.

Debt pushdown

Polish: debt push-down

A debt pushdown is the transfer of debt taken on to buy a company from the acquisition vehicle (a special purpose vehicle) down to the target company, whose cash flows are meant to repay it. It most often takes place through a merger of the acquisition vehicle with the target after closing, and sometimes through refinancing the debt at the target level. The debt can then be serviced directly from the target’s cash flows, and the lender can take security over the target’s assets. A dividend paid to the acquisition vehicle lets it service its debt from the target’s cash flows but does not move the debt. The structure requires analysis of the restrictions that depend on the target’s legal form, including the rules on a joint-stock company financing the acquisition of shares it has issued (Article 345 of the Polish Commercial Companies Code, KSH), the ban on payments to shareholders of a limited liability company from assets needed to fully cover the share capital (Article 189 § 2 KSH), and the tax consequences. Debt financing costs incurred to acquire shares are not tax-deductible to the extent they would reduce a tax base that includes revenue from the continued business of the acquired company, in particular after a merger (Article 16(1)(13e) of the Polish CIT Act).

See also: acquisition loan, covenants.

Debt service coverage ratio, DSCR

Polish: wskaźnik pokrycia obsługi długu

The debt service coverage ratio (DSCR) is the ratio of cash flow available for debt service to principal and interest payments in the same period. A value above 1 means that cash flow is enough to service the debt. Banks use it in covenants and when assessing capex loans and project finance. The loan agreement defines the numerator, for example EBITDA less taxes paid and capital expenditure and adjusted for changes in working capital, and the payments included in the denominator, so DSCR values from different agreements are not always comparable.

See also: covenants; capital expenditure loan, capex loan; interest coverage ratio, ICR.

Debt service reserve account, DSRA

Polish: rachunek rezerwy obsługi długu

A debt service reserve account (DSRA) is a borrower’s bank account in which it must keep enough cash to service its debt for a period set in the loan agreement, for example the next few principal and interest installments. The reserve covers installments when current cash flow falls short. The funds in the account are usually subject to a financial pledge or a block in favor of the bank. The account is used mainly in project finance and acquisition loans. The agreement may allow a bank guarantee instead of cash.

See also: project finance; debt service coverage ratio, DSCR; financial pledge and account block.

Documentary letter of credit

Polish: akredytywa dokumentowa

Under Article 85 of the Polish Banking Law, a documentary letter of credit is a written undertaking by a bank acting on the instructions of a client but in its own name to pay the beneficiary an agreed amount once the beneficiary meets all the conditions of the credit. The condition is usually the presentation of the documents specified in the credit, such as a bill of lading evidencing shipment, a commercial invoice, or a certificate of origin. A letter of credit protects the seller against nonpayment and assures the buyer that the bank will pay only against compliant documents. The bank examines documents, so a letter of credit does not guarantee the quality of the goods. In international trade, the parties usually apply the ICC rules (UCP 600).

See also: trade finance, bank guarantee.

Event of default

Polish: przypadek naruszenia

An event of default is an event listed in a loan agreement that may, subject to the agreement and the law, entitle the bank to terminate the agreement, accelerate the loan, or stop disbursements. It usually includes nonpayment, a covenant breach, misrepresentation, a default under another financing agreement (cross-default), insolvency, the opening of restructuring proceedings or a declaration of bankruptcy, and a material adverse change. Agreements often provide a cure period. The bank may also grant a waiver. Polish restructuring law may restrict termination after proceedings are opened.

See also: termination of a loan agreement, cross-default clause, covenants, waiver.

Facility agent and arranger

Polish: agent kredytu i aranżer

The facility agent and the arranger are roles that banks play in a syndicated loan. The arranger structures the financing, negotiates the terms with the borrower, and invites other banks into the syndicate, and it receives a fee for this work. The facility agent administers the loan after signing: it receives drawdown requests, handles payments, collects information and financial statements from the borrower, and passes them on to the lenders. There is often also a security agent, which takes the security for the lenders and exercises the rights under it. For registered pledges and mortgages, it acts as pledge administrator and mortgage administrator, in its own name but for the lenders’ account.

See also: syndicated loan; loan fees, upfront fee, commitment fee.

Factoring and reverse factoring

Polish: faktoring i faktoring odwrotny

Factoring is the financing of trade receivables: a company transfers its receivables from customers to a factor and receives an advance on them before they fall due. In non-recourse factoring, the factor takes on the risk of the customer’s insolvency; in recourse factoring, it may demand repayment of the advance if the customer does not pay. Reverse factoring is arranged by the buyer: the factor pays the buyer’s suppliers on or before the invoice due date, and the buyer pays the factor on agreed terms, often later. Factoring brings in cash from receivables sooner, and reverse factoring may extend the buyer’s payment terms and give suppliers earlier payment, sometimes net of a discount. In a deal, the parties check whether the factoring balance is a debt-like item.

See also: days payables outstanding, DPO; working capital facility.

Financial pledge and account block

Polish: zastaw finansowy i blokada środków na rachunku

A financial pledge is a pledge over rights to cash in a bank account, financial instruments, or credit claims, generally excluding consumer credit claims, created without an entry in a register under the Polish Act on Certain Financial Collateral when one party is a bank or another institution listed in the Act and neither party is a natural person. It allows the creditor to enforce quickly. An account block is a restriction under which the account holder may not use a specified amount without the bank’s consent until the loan is repaid. It is usually combined with a power of attorney allowing the bank to take the funds. Both are used, for example, on a debt service reserve account (DSRA). Not to be confused with a registered pledge.

See also: loan security package; debt service reserve account, DSRA; registered pledge.

Foreign exchange hedging

Polish: zabezpieczenie ryzyka walutowego

Foreign exchange hedging is the use of transactions or operational arrangements that limit the effect of exchange rate changes on a company’s revenue, costs, or debt. The basic tools are a forward contract, which fixes the exchange rate for a future date in advance, and currency options, which give the right, but not the obligation, to exchange at a set rate. A natural hedge is matching the currency of the loan to the currency of the cash inflows that will repay it. Hedges are entered into with a bank under a master agreement, and the bank grants a treasury limit for them or requires a margin deposit.

See also: interest rate swap, IRS; operating leverage.

Intercreditor agreement

Polish: umowa między wierzycielami

An intercreditor agreement is an agreement in which creditors of the same debtor, for example a bank providing senior debt, a mezzanine lender, and shareholders who have made loans, agree on the order of repayment and on how proceeds from enforcing the security are distributed. It sets out the subordination of debt, restrictions on payments to subordinated creditors, the rules for enforcement decisions and the exercise of security rights, and the distribution of proceeds from the security. It is used in acquisition financing with several layers of debt. The debtor and companies in its group are usually also parties to it.

See also: acquisition loan.

Interest coverage ratio, ICR

Polish: wskaźnik pokrycia odsetek

The interest coverage ratio (ICR) is the ratio of operating profit (EBIT) or EBITDA to interest expense in a given period. It shows how many times this measure covers interest on debt. It ignores principal repayments, so a company with a high ICR can still struggle to service its debt when a large installment falls due. Loan agreements and bond terms may set a minimum ICR as a financial covenant and specify which items and which period are used for the numerator and the denominator.

See also: covenants; debt service coverage ratio, DSCR; net debt to EBITDA.

Interest rate swap, IRS

Polish: transakcja zamiany stóp procentowych

An interest rate swap (IRS) is an agreement in which the parties exchange interest payments on the same notional amount: usually one pays a fixed rate and the other a floating rate, such as WIBOR or POLSTR. A borrower with a floating-rate loan enters into an IRS to swap its floating reference rate economically for a fixed rate and limit the effect of rising reference rates on its cost of debt, provided the swap’s notional amount, term, and benchmark match the loan. The notional amount is not exchanged, and payments due on the same date are usually settled net. Banks require such hedging, for example, for acquisition loans, and terminating an IRS early requires settling its market value, which may mean a payment to or from the bank.

See also: credit margin and floating interest rate; reference rate, WIBOR, POLSTR; foreign exchange hedging.

Lease financing, leasing

Polish: leasing

Leasing is an agreement under which the lessor buys an asset chosen by the lessee and makes it available to the lessee for use in exchange for installment payments, usually with an option to buy it at the end of the term. In Poland, the split between operating and finance leases follows from tax law, while financial statements under the Polish Accounting Act or IFRS may treat the lease differently. Under IFRS 16, the lessee generally recognizes an asset and a lease liability, which, compared with expensing lease payments, increases EBITDA, and increases net debt if its contractual definition includes lease liabilities. Leasing companies, including those in banking groups, provide lease financing.

See also: IFRS 16 impact on EBITDA and net debt; capital expenditure loan, capex loan.

Loan agreement

Polish: umowa kredytu

Under Article 69 of the Polish Banking Law, a loan agreement is an agreement in which the bank undertakes to make an amount of money available to the borrower for a fixed period and a specified purpose, and the borrower undertakes to use it on the agreed terms, repay the amount drawn with interest on the agreed dates, and pay a fee. The agreement should be made in writing. It sets out, among other things, the amount, purpose, repayment dates, interest, security, conditions precedent, covenants, and events of default. Extending credit is a banking activity generally reserved for banks, although other laws may allow other institutions to do so (Article 5(4) and (5)). Other lenders make loans under the Civil Code.

See also: creditworthiness, credit margin and floating interest rate, covenants, conditions precedent to drawdown, beneficial owner and KYC.

Loan fees, upfront fee, commitment fee

Polish: prowizje kredytowe

Loan fees are charges that a bank collects in addition to interest. The upfront fee is paid once, usually as a percentage of the loan amount, at signing or at the first drawdown. The commitment fee compensates the bank for keeping an available but unused limit, for example in a revolving credit facility. The agreement may also provide for fees for amendments, prepayment, and the issue of guarantees. In a syndicated loan, the arranger’s and the facility agent’s fees are added.

See also: credit margin and floating interest rate; revolving credit facility, RCF; loan prepayment.

Loan prepayment

Polish: przedterminowa spłata kredytu

Loan prepayment is the repayment of all or part of a loan before the dates in the repayment schedule. In a business loan, the agreement specifies whether prepayment is allowed, how much notice is required, and whether the bank charges a fee, often only in the first years. The agreement may also require mandatory prepayment, for example from asset sale proceeds, from excess cash flow, or on a change of control. When the loan is hedged with an interest rate swap (IRS), prepayment may require the swap to be settled or amended.

See also: refinancing; repayment schedule, grace period, and balloon payment; loan fees, upfront fee, commitment fee; cash sweep.

Loan security package

Polish: zabezpieczenia kredytu

A loan security package is the set of rights and instruments that allow the bank to recover its claim if the loan is not repaid: security interests over the assets of the borrower or third parties, personal security, and instruments that make debt recovery and enforcement easier. In Poland, a typical package includes a mortgage over real estate, a registered pledge over movables, shares, or a collection of assets, a security assignment of receivables, a power of attorney to debit a bank account combined with an account block, a blank promissory note, sureties and guarantees, and a submission to enforcement. The scope depends on creditworthiness, the type of loan, and the value of the assets.

See also: registered pledge; submission to enforcement; capital expenditure loan, capex loan; mortgage; security assignment of receivables; blank promissory note; financial pledge and account block.

Loan-to-value ratio, LTV

Polish: wskaźnik LTV

The loan-to-value ratio (LTV) is the ratio of the loan amount to the value of the collateral, usually real estate, expressed as a percentage. In commercial real estate lending, the bank sets a maximum LTV when it grants the loan and often includes it in the agreement as a covenant tested after each revaluation. The lower the LTV, the larger the value cushion that protects the bank if property prices fall. Exceeding the permitted LTV may require a partial repayment or additional security.

See also: mortgage, loan security package, creditworthiness.

Mortgage

Polish: hipoteka

A mortgage is a security interest in real estate, a limited property right under Polish law, that allows the creditor to satisfy its claim from the property regardless of who owns it and with priority over the owner’s personal creditors. It is governed by the Polish Act on Land and Mortgage Registers and Mortgages. A mortgage arises upon entry in the land and mortgage register and secures a claim up to a stated amount. It can also encumber perpetual usufruct and a cooperative ownership right to premises. The bank usually requires a property valuation, and the loan-to-value (LTV) ratio expresses the loan as a share of that value.

See also: loan security package; loan-to-value ratio, LTV.

Multi-purpose credit line

Polish: limit wielocelowy / linia wielocelowa

A multi-purpose credit line, also called a multi-option facility, is a credit limit made available under a framework agreement with a bank, which a company uses as one combined limit for various products, such as an overdraft, a revolving credit facility, bank guarantees, and letters of credit. The company allocates the limit among the products within sublimits set in the agreement. This combines funded facilities with non-cash products, such as guarantees and letters of credit, under one credit assessment and one security package. The agreement is usually concluded for one year or several years.

See also: overdraft facility, bank guarantee, documentary letter of credit.

Negative pledge

Polish: zakaz ustanawiania zabezpieczeń

A negative pledge is the borrower’s undertaking not to grant security over its assets to other creditors without the bank’s consent, except for security permitted under the agreement. It protects the bank’s position, especially when the loan is not fully secured. It is often accompanied by a pari passu clause, in which the borrower represents that its obligations to the bank rank at least equally with its other unsecured and unsubordinated obligations, except those preferred by law. A breach of the negative pledge is an event of default.

See also: loan security package, event of default, intercreditor agreement.

Net debt to EBITDA

Polish: wskaźnik długu netto do EBITDA

Net debt to EBITDA is the ratio of a company’s net debt to its EBITDA, usually for the last twelve months. It expresses net debt as a multiple of annual EBITDA. It does not show how long repayment would take, because EBITDA ignores taxes, capital expenditure, and changes in working capital. It is the main leverage measure in loan and bond covenants and in assessing debt capacity, for example in leveraged buyouts. The loan agreement specifies which items count as net debt, such as lease liabilities, and whether EBITDA includes pro forma adjustments.

See also: net debt, EBITDA, covenants.

More in the article “Company debt before a sale. Too little costs you for years, too much costs you at the deal”.

Overdraft facility

Polish: kredyt w rachunku bieżącym

An overdraft facility is an agreed overdraft limit on a company’s checking account that the company uses as needed, with every payment into the account automatically reducing the balance owed. Interest is paid only on the amount actually used, and the bank may charge a fee on the unused part. An overdraft covers short-term cash shortfalls, for example when customers pay late. It is usually granted for one year with the option of renewal, and the bank reassesses creditworthiness at each renewal.

See also: working capital facility; revolving credit facility, RCF; multi-purpose credit line.

Project finance

Polish: finansowanie projektów

Project finance is financing for a project, such as a power plant, a wind farm, or an infrastructure facility, extended to a special purpose vehicle whose main source of repayment is the project’s cash flow. The sponsors contribute equity, and the financing is provided without recourse to the sponsors or with limited recourse. The bank assesses mainly the project contracts, construction and operating risks, and the projected DSCR. The security consists of the vehicle’s assets and its rights under the project contracts. The financing has a long tenor and a repayment schedule matched to the project’s cash flow.

See also: debt service coverage ratio, DSCR; syndicated loan; intercreditor agreement.

Public loan guarantees, BGK

Polish: gwarancje publiczne

Public loan guarantees are loan repayment guarantees issued by Bank Gospodarstwa Krajowego (BGK) under government and EU programs, which the borrower applies for through its lending bank. The basic product is the de minimis guarantee for micro, small, and medium-sized enterprises: it generally covers up to 60% of the loan principal, up to PLN 5 million, for up to 60 months for a working capital facility and up to 120 months for a capex loan. For financing licensed defense industry activities, coverage reaches up to 80%, and for manufacturing specified dual-use products up to 70%. The guarantee is secured with a blank promissory note. BGK also offers other guarantees, such as Biznesmax Plus and Ekomax.

See also: capital expenditure loan, capex loan.

Reference rate, WIBOR, POLSTR

Polish: stopa referencyjna

A reference rate is a market benchmark that determines the floating rate on loans, bonds, and derivatives. In Poland, WIBOR, administered by GPW Benchmark, is still in use. Under the benchmark reform, it is being replaced by POLSTR, published since June 2025 and based on overnight transactions; contracts use its compounded rates, such as the 1M POLSTR compound rate. The Polish Financial Supervision Authority (KNF) expects supervised entities, as a rule, to stop entering into new WIBOR-based contracts after December 31, 2026, and 1M, 3M, and 6M WIBOR will be published until December 31, 2036.

See also: credit margin and floating interest rate; interest rate swap, IRS.

Refinancing

Polish: refinansowanie

Refinancing is the repayment of existing debt with the proceeds of new financing, usually on better terms or in a better-suited structure. Companies refinance to lower the margin, extend the repayment period, release security, or loosen covenants. In an M&A deal, refinancing the target’s debt may be necessary because loan agreements usually contain a change of control clause. Prepaying a loan may trigger a fee, and the new lender makes drawdown conditional on agreed arrangements to repay the existing debt and on the existing lender’s undertaking to release its security upon repayment.

See also: acquisition loan; capital expenditure loan, capex loan.

Registered pledge

Polish: zastaw rejestrowy

A registered pledge is a pledge over movable assets or transferable property rights, created by an agreement and an entry in the register of pledges kept by the courts. It is governed by the Polish Act on Registered Pledges and the Register of Pledges. The pledged asset usually stays with the pledgor, who can keep using it, for example by operating machinery or exercising rights attached to shares. A pledge can also cover a collection of movables or rights that forms an economic whole, even if its composition changes, such as warehouse inventory (Article 7(2)(3)). In the cases and on the terms set out in the Act, the agreement may provide for enforcement by the pledgee taking ownership of the pledged asset or by selling it at a public auction.

See also: loan security package, submission to enforcement, security transfer of title.

Repayment schedule, grace period, and balloon payment

Polish: harmonogram spłat, okres karencji i spłata balonowa

The repayment schedule sets the dates of principal and interest installments on a loan and the principal amounts; with a floating rate, interest depends on the rate in each period. A grace period is time at the start of the agreement during which the borrower does not repay principal and usually pays only interest; it is used, for example, in a capex loan until the investment starts to generate revenue. A balloon payment means that the last installment is much larger than the earlier ones, and a bullet repayment means that all principal is repaid at the end. The borrower often repays a large final installment by refinancing.

See also: capital expenditure loan, capex loan; loan prepayment; debt service coverage ratio, DSCR.

Revolving credit facility, RCF

Polish: kredyt odnawialny / rewolwingowy

A revolving credit facility (RCF) is a credit limit that the borrower can draw on repeatedly during the term of the agreement, because repaid amounts become available again. Funds are paid out in separate drawings at the borrower’s request, usually for chosen interest periods, which distinguishes it from an overdraft. In acquisition financing and syndicated loans, a revolving credit facility complements term loans and finances working capital. The bank usually charges a commitment fee on the unused part of the limit.

See also: working capital facility; loan fees, upfront fee, commitment fee; term loan.

Not to be confused with: overdraft facility.

Security assignment of receivables

Polish: przelew / cesja wierzytelności na zabezpieczenie

A security assignment of receivables is the transfer to the bank of the borrower’s receivables, for example from customers, under a contract, or under a property insurance policy, to secure repayment of the loan. Once the loan is repaid, the receivables revert to the borrower, usually under a condition subsequent in the assignment agreement or by reassignment. The assignment can be disclosed, when the debtor of the assigned receivable is notified of the assignment and usually pays into an account designated by the bank, or undisclosed, when notice is given only if loan repayment runs into trouble. In a capex loan, the bank usually takes an assignment of the rights under the insurance policy covering the financed assets.

See also: loan security package, factoring and reverse factoring.

Security transfer of title

Polish: przewłaszczenie na zabezpieczenie

A security transfer of title is the transfer to the bank, by the debtor or a third party, of ownership of a movable asset or securities until the loan is repaid with interest and fees (Article 101 of the Polish Banking Law). The asset usually stays with the transferor, who keeps using it, and once the debt is repaid, ownership either reverts automatically under a condition subsequent or must be transferred back by the bank, depending on the agreement. If ownership of goods identified by type or a collection of goods is transferred, the debtor or the third party must separate and mark them and, unless the agreement provides otherwise, keep a record of changes. It is sometimes used instead of a registered pledge because it requires no entry in a register.

See also: loan security package, financial pledge and account block.

Not to be confused with: registered pledge.

Split payment mechanism

Polish: mechanizm podzielonej płatności

The split payment mechanism is a way of paying an invoice by a dedicated bank transfer in Polish zlotys in which the VAT amount goes to the supplier’s separate VAT account and the net amount usually to its settlement account. Funds in the VAT account can be used mainly to pay VAT on suppliers’ invoices, taxes, and social security contributions (Article 62b of the Banking Law). VAT taxpayers must use the mechanism when paying for goods and services listed in Annex 15 to the Polish VAT Act if the gross amount due on the invoice exceeds PLN 15,000 or its equivalent in a foreign currency, with exceptions such as amounts settled by setoff; otherwise, it may be used voluntarily if the payment meets the conditions for its use (Article 108a of the VAT Act). Cash planning must therefore allow for inflows held in the VAT account.

See also: cash pooling; net working capital, NWC.

Standstill agreement

Polish: umowa o wstrzymaniu działań wierzycieli

A standstill agreement is an agreement in which banks and other creditors undertake, for a set period, not to terminate loans or enforce their claims, while the debtor prepares a debt restructuring plan. It may keep existing limits in place or reduce them, imposes reporting duties on the debtor, and requires creditor consent for major decisions. It gives time to reach an out-of-court agreement. If no agreement is reached, the debtor may file for the opening of restructuring proceedings.

See also: termination of a loan agreement.

Submission to enforcement

Polish: oświadczenie o poddaniu się egzekucji

A submission to enforcement is a debtor’s statement, made in the form of a notarial deed, that it submits to enforcement for a specific obligation (Article 777 § 1(4) and (5) of the Polish Code of Civil Procedure). The notarial deed is an enforcement title, so once a court has granted the deed an enforceability clause, the bank can start enforcement without a lawsuit. In bank financing, the deed usually sets a maximum amount, the event on which enforcement depends, and a deadline by which the creditor may apply for the enforceability clause. Since the provisions on the bank enforcement title were repealed, it has become standard loan security. The borrower gives it, often a surety too, and an owner of encumbered property who is not personally liable for the debt may submit to enforcement against that property (Article 777 § 1(6)).

See also: loan security package, registered pledge.

Suretyship

Polish: poręczenie

A suretyship is an agreement in which the surety undertakes to the creditor to perform the debtor’s obligation if the debtor fails to perform it. The surety’s liability is accessory, meaning that it depends on the existence and scope of the main debt, and is generally joint and several with the debtor. The surety’s statement must be in writing, or it is void. Banks accept sureties from group companies and shareholders, often together with their submission to enforcement. Not to be confused with a bank guarantee, which is an independent obligation.

See also: loan security package, comfort letter, bank guarantee, parent company guarantee.

Syndicated loan

Polish: kredyt konsorcjalny / syndykowany

A syndicated loan is a loan granted to one borrower or several group companies by several banks under a common agreement in which each bank commits its own share of the amount (Article 73 of the Polish Banking Law provides for a bank consortium agreement). It makes it possible to finance amounts beyond the capacity or limits of a single bank. An arranger organizes the syndicate, and after signing, a facility agent administers the loan and passes payments and information between the parties. Most decisions, such as waivers, are taken by the majority of lenders defined in the agreement, while changes to amounts or repayment dates require the consent set in the agreement, often of all lenders or of all lenders affected by the change. The documentation is usually based on Loan Market Association (LMA) templates.

See also: facility agent and arranger, acquisition loan, intercreditor agreement, project finance.

Term loan

Polish: kredyt terminowy

A term loan is a loan disbursed in a single drawing or in tranches during a set availability period and then repaid under a schedule or in one payment at maturity. Repaid amounts cannot be drawn again, which distinguishes it from a revolving credit facility. In acquisition financing and syndicated loans, a term loan usually finances the purchase price or the refinancing of existing debt. In leveraged finance, it is often split into a Term Loan A, repaid in installments, and a Term Loan B, repaid mostly or entirely at final maturity. A capex loan is usually a term loan.

See also: syndicated loan; capital expenditure loan, capex loan; acquisition loan.

Not to be confused with: revolving credit facility, RCF.

Termination of a loan agreement

Polish: wypowiedzenie umowy kredytu

Termination of a loan agreement is the bank’s notice ending the agreement upon expiry of the notice period, after which the outstanding loan is due. The bank may reduce the loan or terminate the agreement if the borrower has breached the loan conditions or lost its creditworthiness, unless the Polish Restructuring Law provides otherwise (Article 75 of the Banking Law). However, the bank may not terminate for loss of creditworthiness or risk of bankruptcy if it has agreed to a recovery plan that the borrower is properly carrying out (Article 75(3)–(4)). The notice period is 30 days, or 7 days if the borrower is at risk of bankruptcy, unless the agreement provides for a longer one. If the borrower is late with a payment, the bank calls for payment within at least 14 business days and informs the borrower that it may apply for debt restructuring within 14 business days of receiving the call (Article 75c).

See also: event of default, standstill agreement.

Trade finance

Polish: finansowanie handlowe

Trade finance consists of financial products, mainly from banks, that finance trade transactions, handle payments, or mitigate their risks, especially in foreign trade. It covers documentary letters of credit, bank guarantees such as payment, performance, or bid guarantees, documentary collections, and the financing of receivables and payables, including factoring. Depending on the product, it reduces the risk that the counterparty will not pay or will not perform, and it may allow payment terms to be extended without tying up cash, although the bank may require collateral, such as a cash deposit. Banks often provide guarantees and letters of credit under a multi-purpose credit line.

See also: factoring and reverse factoring.

Waiver

Polish: zgoda na odstępstwo

A waiver is the bank’s written consent not to apply a specific provision of the loan agreement or not to act on its breach, for example a covenant breach in a given period. In a syndicated loan, it comes from the lenders whose consent the agreement requires, which depending on the matter is a set majority or all lenders. It may cover a single event or a set period. The bank usually charges a fee for it and may require amendments, such as a higher margin. It is best to request a waiver before the breach occurs. When a company is sold, a change of control often requires the bank’s consent.

See also: covenants, event of default, change of control clause.

Working capital facility

Polish: kredyt obrotowy

A working capital facility is a loan that finances a company’s day-to-day operations, mainly inventory, receivables, and other components of working capital. It can take the form of a non-revolving loan repaid in installments, a revolving credit facility, or an overdraft. The bank assesses the application on the basis of operating cash flow and the cash conversion cycle. Receivables, inventory, or a guarantee from Bank Gospodarstwa Krajowego (BGK) may secure the loan. A working capital facility is not meant to finance fixed assets, which is the purpose of a capex loan.

See also: net working capital, NWC; factoring and reverse factoring.

If you are planning bank financing for growth or an acquisition, see the service page Bank financing.

Other sections of the glossary: Deal basics and types, Sale process and documents, Due diligence, Valuation, Price and settlement, SPA and risk allocation, Shareholders and investor rights, Financial statements and metrics, Stock exchange. Index of all entries: M&A and corporate finance glossary.