Preparing Refinancing in Time: The 24-Month Approach

Refinancing only becomes a topic in many organisations once the remaining term of a loan has dropped into single-digit months. For professional real estate investors and companies, that is far too late. Especially in a volatile interest rate and banking environment, a solid refinancing strategy needs sufficient lead time. The 24-month approach starts exactly there: at the latest two years before maturity, a structured process begins that links maturities, key metrics, market environment and lender dialogue.

Why 24 months is a sensible lead time

A 24-month lead time is not a hard rule, but a very practical guideline. It reflects the fact that refinancing today is much more than simply extending an existing loan. Valuations need to be updated, asset or corporate metrics reassessed, internal strategies aligned and several financing partners involved. On top of that, credit processes on the lender side often run through several committees and can be delayed further by changes in the market. With 24 months of lead time, there is enough room for three levels of work: a factual analysis of the current structure, a well prepared market and lender dialogue, and the implementation phase including contract negotiations. Borrowers who use this period consistently avoid last minute decisions shortly before maturity, when options are limited. Instead of “take it or leave it”, they gain a genuine choice between different structures, tenors and terms. At the same time, the 24-month approach builds in buffers for unexpected events. Delayed valuations, longer credit processes, internal decision paths or short term market moves will not automatically create time pressure, but can be absorbed within a planned process.

Analysis phase: reviewing structure, metrics and collateral

The first months of the 24-month window are dedicated to taking stock. In real estate, this means systematically mapping assets, portfolios and existing financings: tenors, fixed interest periods, amortisation profiles, covenants and collateral. In a corporate context, additional lines such as working capital facilities, investment loans and any private debt structures are included. The objective is to obtain a clear picture of the starting position. Which financings mature when, how are volumes and collateral distributed, where do concentration risks exist. In parallel, current key figures are analysed: leverage levels, cash flows, debt service coverage, overall indebtedness and, where relevant, ratings. This shows whether the structure still fits today’s business model or whether refinancing should also be used to correct patterns that have grown historically. Part of this analysis is defining a target picture. Should leverage be reduced, fixed interest periods extended, the lender base focused or alternative sources of capital integrated. The 24-month approach deliberately uses the upcoming refinancing not only to roll loans, but to improve the quality of the capital structure. Only once this target picture is clear does it really make sense to start the dialogue with financing partners.

Market and partner dialogue: exploring funding options

The analysis is followed by the dialogue phase. No later than 18 to 12 months before maturity, existing and potential new financing partners should be approached. The basis is a consistent information package: updated asset or corporate data, business plans, scenarios and a proposal for the desired future structure. With existing banks, the goal in this phase is to align expectations. How do they see the exposure, which leverage range do they consider appropriate, which covenants and metrics matter most to them. At the same time, alternatives can be explored, such as additional banks, debt funds, whole loan providers or platform based lenders. The 24-month lead time allows these conversations to take place on an equal footing rather than under time pressure. It is important not to compare offers based on margin alone. Tenor, fixed interest structure, covenants, flexibility for prepayments, reporting requirements and the take-out capability for future refinancings are just as important. In many cases, a slightly higher margin within a well controllable structure is preferable to the nominally cheapest rate in a very tight covenant framework.

Implementation: from term sheet to new funding structure

The final 12 months of the 24-month window are used for implementation. Based on the offers obtained, structural options are compared and the preferred funding mix is defined. This might involve extending with existing banks, reorganising the lender base, bringing in alternative lenders or combining several elements. Then comes the term sheet phase, detailed negotiations and legal documentation. During this period, covenants are finalised, collateral concepts aligned, reporting channels defined and repayment mechanics agreed. Depending on the complexity of the transaction, this may also require external valuations, legal reviews and internal committee approvals. The 24-month approach ensures that all of this happens within a planned framework, instead of being squeezed into the last weeks before maturity. Shortly before the existing facility matures, the new structure should ideally already be signed and ready for drawdown. This helps to avoid overlaps, double burden or expensive stopgap solutions. Refinancing thus becomes a manageable process rather than a stress event, linking interest rate risk, structural quality and strategic objectives. Borrowers who make consistent use of the 24-month approach establish, over time, a refinancing routine in which maturities are orchestrated deliberately rather than merely administered.