How to achieve an employee buyout

Financing an employee buyout


The financing of an employee buyout depends on the financial viability of the business and how the buyout is being structured. The right solution may involve a combination of several different options.

Shares through an employee trust

If shares are being bought by an employee trust, the trust may be able to borrow from a bank - particularly if the business has strong, predictable cashflow and good asset backing. The trust then uses future business profits to pay interest and make loan repayments.

Specialist lenders for employee buyouts

As well as banks, there are also a number of specialist lenders that finance employee buyouts.

Alternatively, the owner of the business can help finance the business by agreeing to accept payment over time rather than all at once. Owners who have faith in their business - and support the idea of an employee buyout - are often willing to do this.

Employees themselves can also help finance the buyout. They can finance the gradual acquisition of shares by taking shares or share options as part of their remuneration. Or they can invest their own savings.

As the financing structure can also have important tax consequences, you may want to take specialist advice. Read more on help and advice for employee buyouts.