Consultancy business finance for trade, export and advisory firms

Yes, usually through the company buying back the shares or a new holding company buying them, with the loan sized on the fees the firm earns without the departing founder. A company buying its own shares must follow Companies Act rules, which in the usual case means paying from distributable profits, and payment for the shares is due at the point of purchase, which is why a loan often supplies the lump sum. Lenders look at which clients the leaving co-founder brought in or manages, how much of the pipeline depends on them, what restrictive covenants they will sign and whether the remaining team can deliver the work. We arrange shareholder buyout finance for consultancies and present the client and fee picture lenders want.

Will a lender want a departing co-founder to sign restrictive covenants?

Usually, yes. A lender funding a buyout is relying on the clients staying, so it expects the leaver to agree not to approach clients or staff, and not to compete, for a set period after leaving. Covenants that are too wide or too long risk being unenforceable, so they are normally tailored to the clients and services the leaver actually worked on. Some deals also hold back part of the price, paid later only if fee income holds up, which protects the remaining owners and reassures the lender.

• Client map. Which clients each founder manages, with fee income by client.
• Valuation. A price based on profits after a market salary for the work the leaver did.
• Tax clearance. HMRC can be asked in advance how a company purchase of its own shares will be taxed.
• Deferred price. Any amount paid later, and the fee targets it depends on.

GOV.UK explains HMRC clearance for a company buying its own shares. Our shareholder buyout finance page covers the structures in more detail, and acquisition finance covers buying another firm. Instant Quotes names panel lenders that may finance a buyout.

A consultancy's balance sheet is thin: laptops, a lease, perhaps some software. Its value sits in contracts, client relationships and the people who deliver them. The cash pressure comes from timing rather than from big purchases.

• Associates are paid before clients pay. Freelance consultants usually invoice monthly and expect payment within a couple of weeks. The client may be on 45 or 60-day terms, and a large corporate or public body may take longer.
• Fee models differ. Day-rate work is invoiced as it is done. Fixed-fee projects are often billed at milestones, so weeks of work can sit unbilled. Success fees, common in grant applications, tender writing and some market-entry work, are only earned if the outcome happens.
• Overseas clients add friction. Export consultants frequently bill buyers, distributors or parent companies abroad, sometimes in euros or dollars, with longer payment habits and currency swings between invoice and receipt.
• Travel and disbursements. Trade missions, overseas site visits and trade show attendance are paid up front and recharged later, if the contract allows it.

The result is a business that can be profitable on paper while its bank balance dips every month end. That pattern, rather than a single large purchase, is what most consultancy borrowing is for.

• Taking on a larger contract that needs extra associates or a new hire before the first invoice is paid
• Covering the gap on a framework or public-sector contract with long payment terms
• Opening an office overseas or a UK hub near a port or freight cluster
• Buying out a retiring co-founder, or acquiring a smaller consultancy and its client list
• Spreading a VAT or corporation tax bill after a strong year
• Investing in a client portal, compliance software or a customs declaration system

Borrowing to fund a contract only makes sense if the contract's margin covers the cost of the money and still leaves profit. Check the payment clauses before you sign: the statutory right to charge interest on late commercial payments is a useful lever with slow payers, and shortening terms may remove the need to borrow at all.

Consultancies that engage associates through personal service companies should also be clear on the off-payroll working rules (IR35). A reclassification can create an unexpected PAYE liability, and lenders ask about it when associate costs are high. If a tax bill is the problem, compare a loan with a direct arrangement; our guide to Time to Pay versus a tax loan sets out the difference. Personal guarantees are common for firms of this size, so read our guide to personal guarantees first.

Export consultants often advise clients who could themselves use government-backed support. UK Export Finance works with exporters and their banks; it does not usually fund the adviser, but knowing its products makes you more useful to clients.