Calculator
Management buyout calculator: the funding structure, layer by layer
Enter the business's EBITDA, the multiple being discussed and the debt the cash flow might carry, and the calculator builds the sources and uses table a funder would expect to see: senior debt, vendor loan note, management cash and the equity gap still to fill, with the year-one cover ratio that decides whether it works.
| Source | Amount | Share of uses | Note |
|---|---|---|---|
| Senior debt | £2,500,000 | 46.3% | 2.5x EBITDA |
| Vendor loan note | £1,000,000 | 18.52% | 20% of price, deferred |
| Management cash | £250,000 | 4.63% | Team equity |
| Equity gap to fill | £1,650,000 | 30.56% | Investor equity, mezzanine or more vendor deferral |
| Total | £5,400,000 | 100% | Total leverage 3.5x EBITDA, debt 64.81% of uses |
Free cash flow is estimated as EBITDA less 5% maintenance capex and 25% tax on profit after year-one interest and capex. Senior service is the annual capital and interest on an amortising loan; the vendor loan is treated as interest-only. Illustrative only.
We will tell you which layers a funder would actually support on your numbers, and where the equity gap can be closed.
How to read the result
Two numbers matter. The equity gap is the cash the deal still needs after senior debt, the vendor loan and the team's own money: it is filled by a private equity investor, a mezzanine lender, a bigger vendor deferral or a smaller price. The debt service cover ratio is free cash flow after tax and capex divided by the annual cost of all the debt: below 1.25x the structure is oversized for the business and a funder will cut the senior multiple, lengthen the term or ask for more equity. Move the senior multiple and vendor share until both numbers are acceptable, and you have the shape of a fundable deal.
What the calculator does not know
It cannot see the quality of the EBITDA, the strength of the management team, customer concentration, the sector or the vendor's appetite for deferral, all of which move a real funder's leverage and price. Indicative pricing bands as of September 2026 sit at 7% to 10% all-in for bank senior debt, 9% to 14% all-in for cash flow lenders and 5% to 8% on vendor loan notes. For how each layer works, read the management buyout finance hub, then check how much the business can carry with the debt capacity calculator.
Funding structure questions, answered
What is a sources and uses table?+
The one-page reconciliation every buyout is built on. Uses are what the money is spent on: the price, transaction fees and day-one working capital. Sources are where it comes from: senior debt, a vendor loan note, management cash and investor equity. The two columns must match, and the gap between the price and the debt is the equity the deal has to find.
What multiple of EBITDA will a bank lend on an MBO?+
Typically 2.0x to 3.0x EBITDA as senior debt, amortising over four to six years. Specialist cash flow lenders go further, often 3.0x to 4.0x, at a higher price, and private equity backed deals carry more again with a mezzanine or unitranche layer. Indicative as of September 2026; each funder sets its own ceiling by sector and credit quality.
How big should the vendor loan note be?+
Whatever closes the gap that debt and management cash cannot, within what the vendor will accept. On UK owner-managed deals 15 to 35 percent of the price is common. Senior lenders will require it to be subordinated under a deed of priority and will often block vendor payments while their own covenants are tight.
What debt service cover ratio do MBO lenders want?+
Most want free cash flow of at least 1.25x to 1.5x the annual capital and interest, tested on the forecast and then annually against actuals. A ratio near 1.0x means every pound of cash flow is going to funders, which no credit committee will sanction on a management buyout.
What if the equity gap is too big?+
Four levers, usually pulled together: a larger or longer vendor loan note, an asset based facility alongside the cash flow debt, a partial buyout that leaves the owner with a stake, or private equity taking the gap for a share of the business. The calculator shows the gap; the structuring work is closing it.