Management Buyout Financing
When it’s time to sell your business there are many options available but the most romantic and sentimental one can often make the best business sense too.
Management buyout financing allows experienced people working in a company to buy out the existing management.
What is a management buyout?
A management buyout (MBO) is when the existing management team of a company combines resources or raises funds to acquire a controlling interest or all of the company they manage. Usually the team takes full control and ownership of the business and uses their expertise and enhanced motivation to grow the company and take it forward.
There are many advantages to a management buyout over other forms of ownership transfer. A well executed MBO allows for a smooth transition of ownership, the new owners know the company; and literally are the company in some cases.
There’s greater trust and less risk of failure and misunderstandings on both sides, there will be a minimum of disruption to employees, and existing clients and suppliers can be reassured that it will be business as usual.
Of course some internal changes and transfer of responsibilities will occur and have to remain confidential and due diligence has to be completed but this will be handled quickly by two motivated sides.
How to finance your Management Buyout
There is a specific type of finance available for experienced MBO members. While it is more common in larger corporations, MBO’s can occur in small businesses too. Lenders in these circumstances tend to focus less on security and more on available cash flow for debt servicing or CFADS.
There are also other methods available including management contributions or private equity but we can discuss all available options with you. If you have always dreamed of running the business your way then we can help you make that step from employee to owner.
A variety of options include;
- invoice finance,
- secured property loans,
- asset finance,
- unsecured business loans and cash flow facilities.
You may also require, and be best supported, with a combination of these products to meet your specific needs.
How does financing a Management Buyout work?
There’s no one-way route for financing a management buyout, the amount and type of finance will be based on the circumstances, whether that’s using existing business assets or personal assets.
It is advisable to seek help and advice from finance experts like ourselves to discuss your needs and what options are available.
Types of Commercial Mortgages
Owner Occupied Mortgage
Commercial mortgages for owner occupiers are for trading businesses intending to use the property to run their business.
Residential Buy to Let Mortgage
A buy to let mortgage is for the purchase of a residential property to rent out to private individuals.
Commercial Buy to Let Mortgage
A commercial buy to let is also known and referred to as a buy to let mortgage for a limited company, with the purchase of residential property ultimately.
A client would apply for a commercial mortgage if for instance it is a semi-commercial property (e.g shop with a flat above) or a full commercial property (eg
Trading businesses can use Commercial Mortgages to purchase or refinance commercial property from where their business operates. We can help you find the right commercial property finance option to assist you.
Commercial Property Finance
We can help you find the right commercial property finance option to assist you with either purchasing or refinancing a property to let. Whether it’s to house your own business or used as an asset that you can let out to generate additional income.
It’s important to find the most appropriate commercial loan to protect your business, or to support your ambitious business plans. The right amount of money, at the right time, on the right terms, can make or break a business many times over.
Property Development Finance
Property development finance is a range of loan solutions to enable property developers, investors and builders the funds to develop or refurbish houses, apartments, retail or commercial units, we can help you access the right finance.
Businesses can raise money through invoice financing or factoring, obtaining cash from unpaid invoices quickly. This method of financing is generally quicker and less stringent than traditional banking or other commercial finance solutions.
In business cash is king and if you’re looking to get the cash flowing, invoice factoring can be a way to release cash from the account receivable from your balance sheet.
Alternative Finance refers to any form of business finance that comes from a non-traditional provider. It aims to offer funding away from mainstream financing, such as from high street banks and capital markets.
Asset Finance is a great financing option for businesses who require new assets, such as equipment, transport and machinery. It allows businesses to spread the cost of the asset over an agreed length of time.
Enterprise Finance Guarantee (EFG) Scheme
The Enterprise Finance Guarantee (EFG) Scheme is a second chance model for businesses to try again to get the funding that realistically, they should have secured at the first time of asking.