What are the principal tranches typically included in bank financing?

The correct response highlights the common structure of bank financing, which includes a revolver and multiple types of term loans. A revolver is a crucial component of financing that allows the borrower to draw down, repay, and re-borrow funds, making it highly flexible for managing short-term capital needs.

Term Loan A and Term Loan B represent different tranches of secured term debt that banks typically provide. Term Loan A usually has shorter repayment terms and lower interest rates compared to Term Loan B, which features a longer maturity and potentially higher interest rates. This distinction allows lenders to structure financing to meet both the immediate working capital needs and long-term financing objectives of borrowers.

The combination of these three elements—revolver, Term Loan A, and Term Loan B—reflects a standard leverage facility arrangement in leveraged finance, wherein firms can access a mix of short-term and long-term financing tailored to their operational requirements, ultimately supporting their overall capital structure strategy.