Management buyout funding, source by source.

Six documents, and the quality of them decides how quickly the funding arrives. Three years of filed accounts plus current management accounts. An adjusted EBITDA schedule with every adjustment evidenced. A business plan of ten to fifteen pages that says what the business does, who buys from it, and what the management team will do differently. An integrated three-year financial forecast with a downside case. A sources and uses table. And a short note on each member of the management team explaining what they own operationally.

The business plan is where most management teams underinvest. Funders are not looking for ambition, they are looking for evidence that the people asking for the money understand where the profit comes from and what could stop it. A plan that quantifies customer concentration honestly, prices in the cost of replacing the vendor, and shows the growth initiatives as upside rather than as the basis of repayment does more for a management team than any amount of polish. Where a corporate finance adviser or the business\~s chartered accountants have already prepared a pack, we work from it rather than duplicating it.

After a funder issues indicative terms, financial due diligence begins in earnest: a third-party accountant tests the earnings quality, working capital, revenue recognition and forecast assumptions, and legal due diligence reviews contracts, property, employment and any change of control provisions. Budget four to six weeks and expect questions that feel intrusive. The success rate of a well-prepared pack through diligence is high; a thin one usually produces a repriced offer rather than a clean approval.

The full process timeline · Structure and newco

A senior bank facility is the lowest-cost funding in the structure, indicatively 7% to 10% all-in as at September 2026, because it ranks first and takes a debenture over the whole business. That priority is exactly why the terms are tight. Expect leverage capped around 2.0x to 3.0x EBITDA, amortisation over four to six years, a debt service cover covenant tested quarterly or annually, a leverage covenant that steps down each year, and capped personal guarantees from the directors.

Banks fund businesses that look boring in the best sense: three years of profitable accounts, a diversified customer base, a management team staying in place and a financial forecast that does not depend on a step change. Established manufacturing, distribution and services businesses with steady margins are the natural fit, and management teams in those sectors should start here. Where a business fits, no other financing source is cheaper. Where it does not, pushing a bank to stretch usually produces a smaller facility with harder covenants rather than a better deal, and the answer is to bring a different lender type into the structure instead. Names active in this market include Barclays, HSBC UK, Lloyds Bank, NatWest, Santander UK, Allica Bank, illustrative of names active in this market rather than a recommendation.

Term debt mechanics, covenants and security are set out on management buyout loans.

More than most teams expect. An asset based facility builds a borrowing base from what the business already owns: commonly up to 90% of eligible trade debtors, 50 to 70% of plant and machinery, and 60 to 70% of property, with a stock line where the goods are readily saleable. For manufacturing, distribution, recruitment and haulage businesses, that borrowing base frequently exceeds what any cash flow multiple would support, and it grows with the business instead of amortising away, which suits a management team planning growth immediately after completion.

The mechanics need respect. Availability is recalculated every month, so a concentrated debtor, a long-dated ledger or a large credit note can shrink the facility exactly when cash is tight. Service fees and audit costs sit on top of the margin, so the headline 6% to 10% plus facility fees understates the all-in cost. Used properly, though, asset based funding takes pressure off the term debt in the wider financing structure and leaves more of the forecast free cash flow available for debt service. Providers active in the market include Close Brothers, Aldermore, Arbuthnot Commercial ABL, Secure Trust Bank Commercial Finance, Time Finance.

Asset based lending for an MBO in full.

When debt and vendor funding still leave a hole, private equity fills it. For a business above roughly £5 million of enterprise value an institutional investor will typically fund 30 to 50% of the price through a mixture of ordinary shares and loan notes, take a board seat and work towards an exit in three to seven years. The management team keeps a geared slice of the upside through sweet equity, often with a ratchet that increases its share if returns beat a hurdle. Mezzanine funding, indicatively 12% to 18% including PIK including any PIK element, is the debt-shaped alternative when the team would rather pay a high coupon than give up ownership.

The real cost of institutional equity is not the return it targets, it is the governance and the timetable. An investor needs an exit, which means the business is being built to be sold or refinanced by a date that is now on someone else's calendar, and the transition towards that outcome shapes every board meeting. For growth businesses with capital needs beyond the buyout, that alignment is worth having, and a strategic investor can open doors the management team cannot. For a stable business the team intends to hold for twenty years, more vendor funding and less equity is usually the better answer. Investors active in the UK lower mid-market include BGF, LDC, Maven Capital Partners, Mercia, Foresight Group, plus regional funds such as British Business Bank, Development Bank of Wales, Scottish Enterprise. Illustrative of the panel, not a recommendation.

Private equity backed MBOs. Where a deal is sponsor-led acquisition finance rather than a management transaction, our sister desk at LeveragedBuyoutFinance.co.uk handles it.

Blend the layers and a typical lower mid-market structure lands somewhere between 8 and 12% all-in as at September 2026, before fees. Fees are where structures are won and lost: arrangement fees of 1 to 2% on the senior debt, non-utilisation fees on any revolving facility, service and audit fees on an asset based line, monitoring fees from a debt fund, plus legal costs on both sides and financial due diligence. On a £6 million transaction, £250,000 to £350,000 of transaction costs is unremarkable, and every pound of it has to be funded somewhere in the sources and uses table. Financial and legal due diligence is the largest single line for most businesses.

We compare packages on total cost over the facility term and on covenant headroom, not on headline margin. A facility half a point cheaper with a leverage covenant that bites in year two is worse than a slightly dearer one that lets the business breathe. On our own fees: We charge an arrangement fee of 1% of the debt raised, payable only on successful drawdown. Where a lender pays us an introducer or procuration fee, that is credited first and you pay only the difference up to 1%. No fee at all if the transaction does not complete. Lenzie Consulting Ltd is not authorised or regulated by the FCA; we arrange unregulated business finance for limited companies and LLPs only, and we are not a lender.

Sequencing matters as much as selection. We take the business to several funders in parallel rather than one at a time, so competing indicative terms arrive within days of each other and a management team can compare like with like on price, covenant headroom and the financial reporting burden. MBOs that go to the incumbent relationship bank first, take the yes, and only then look around tend to pay for that convenience across the whole term. The difference between a first offer and a properly competed one is usually worth far more than the cost of running the process.

The funder panel · Start a conversation