£12,000. A digital business: few physical assets, funded on its trading.
Payroll and project-delivery costs before client invoices were collected.
Flexible line of creditRead the transaction
Other sectors
IT company finance for managed service providers and IT support firms
How IT support firms and managed service providers fund hiring, hardware projects, licensing and acquisitions, and how lenders read your recurring revenue.
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“The whole process was streamlined and extremely easy.”
- Amount
- From £10,000 to £20 millionLarger amounts through secured, property and asset-based finance
- Security
- Secured or unsecuredOptions compared for your case
- Suitable businesses
- Sole traders to limited companiesPartnerships and LLPs too
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In short
Supporting IT companies at every stage.
IT company finance is usually judged on recurring managed-service revenue rather than assets.
Established MSPs commonly use unsecured term loans or revenue-based finance for growth and hiring, acquisition finance to buy smaller providers, and invoice finance or a revolving facility for hardware and project work where distributors must be paid before customers pay. Lenders separate contracted support income from low-margin hardware resale, and check contract terms, customer concentration and key-person risk.
The operating cycle
Where finance fits into your IT company
Cash leaves the business at every stage before it comes back. Each stage below is a point where the right facility can carry the gap.
“He is fair and always gives advice that is in the best interest of his clients.”
- 01
Win work
Orders, contracts or customers secured.
- 02
Buy in
Stock, materials and equipment paid for up front.
Asset finance → - 03
Pay people
Wages and suppliers paid on time.
Working capital → - 04
Deliver
The work is done or the goods are sold.
- 05
Get paid
Customers pay, sometimes weeks later.
Invoice finance → - 06
Tax
VAT and Corporation Tax fall due.
HMRC loans → - 07
Invest
Growth, a new site or new equipment.
Business loans →
A transaction we arranged
£20,840
£20,840 for a digital services business.
Service-led, with few physical assets. The lender focused on trading performance.
Read the transaction- Sector
- Digital services
- Structure
- Business facility
- Outcome
- Completed
About IT company finance
Specialist knowledge. Better outcomes.
This page is for owners of IT support companies and managed service providers (MSPs).
This page is for owners of IT support companies and managed service providers (MSPs), including firms that also sell infrastructure projects, cloud migrations, cyber security services and hardware. Smart Funding Solutions is a broker, not a lender: we approach lenders on our panel of 300+ that understand recurring service revenue, and arrange facilities from £10,000 to £20 million. Other sectors are covered from our SME loans hub. Businesses that build and sell their own software should read software company funding, and those whose main income is lines and connectivity should see telecoms business finance.
- Access to 300+ lendersWhole-of-market search across our lender panel.
- Independent brokerSmart Funding Solutions is an independent broker, not a lender.
- Tailored to your caseYour case presented to lenders suited to it.
- Support from start to finishOur experts handle the process from start to finish.
Funding needs
Funding options for IT companies
Choose the need, and we’ll show you how lenders usually structure it.
Funding options for IT services firms
01
Unsecured term loans
Most established MSPs borrow through unsecured business loans, repaid from managed-service margin. Lenders usually ask directors for personal guarantees, and the amount available tends to reflect profit and the proportion of revenue under contract.
02
Revenue-based finance
Revenue-based finance lends against recurring revenue and repays as a share of it. It can suit MSPs with clean billing data that want repayments to move with income. It is generally a more expensive form of borrowing, so compare the total repayable with a term loan.
03
Invoice finance and revolving credit for projects
Project and hardware invoices to business clients can be funded through invoice finance once delivered and accepted. Many providers exclude monthly managed-service invoices raised in advance, so the facility works best for project-heavy firms. A revolving credit facility is often simpler for an MSP whose project work is occasional: draw for the hardware, repay when the client pays.
04
Acquisition finance
Buying an MSP is usually funded with acquisition finance based on the target's recurring margin, combined with your own contribution and often deferred consideration linked to client retention. Lenders will review the target's contracts for change-of-control clauses and the transfer of key engineers.
05
Leasing for your clients, and finance for your own kit
For larger hardware projects, some MSPs introduce their clients to a leasing company, which pays the MSP on installation while the client pays monthly. That removes the debtor risk from your balance sheet, though the client's credit is assessed by the lessor. Servers, laptops and test equipment for your own use can be funded through asset finance, although IT hardware is treated as a soft asset with low resale value; see our guide to soft asset finance.
06
VAT and tax funding
A VAT loan can spread a VAT bill swollen by a large hardware quarter. Use it for a one-off peak, not as a recurring habit.
Our case study on £45,711 for a data and technology business shows VAT and working capital funded on recurring revenue.
Where IT firms need funding
- Hardware refresh projects. A client orders laptops, switches and firewalls for a site refresh. The distributor wants paying in 30 days; the client pays on 60 days after installation and sign-off. A single large order can exceed your distributor credit limit.
- Hiring ahead of onboarding. A new 200-seat client needs engineers recruited and trained before the first monthly fee arrives.
- Annual licence commitments. Many cloud licences are committed for a year and billed to you monthly by the distributor. If the client fails or leaves, the commitment usually stays with you.
- Buying another provider. Acquiring a smaller MSP or a book of support contracts is a common way to add recurring revenue and engineers at once.
- Security tooling and accreditation. Monitoring platforms, security operations tooling and certifications needed to bid for larger contracts.
- Tax and quarter-end peaks. VAT on large hardware invoices can create a payment due before the client has paid you.
A note on R&D tax relief
Routine IT support, configuration and migrations rarely qualify for R&D relief, because the work does not resolve scientific or technological uncertainty. Lenders that advance against R&D claims will ask hard questions about claims made by service businesses. If you do develop genuinely new tools or platforms, check what R&D costs can be claimed with your accountant before relying on it.
Risks and trade-offs
- Borrowing to cover thin hardware margins. Funding large hardware orders with expensive short-term money can wipe out the margin. Consider client leasing or upfront deposits instead.
- Licence commitments. Borrowing on the back of licence revenue that you are contractually committed to pay regardless of the client is riskier than it appears.
- Acquisition integration. Clients and engineers may leave after a sale. Structure the price so that part depends on retention.
- Guarantees. Personal guarantees are common. Our guide to personal guarantees explains what they mean in practice.
- Alternatives. Upfront deposits on projects, annual billing in advance for managed services, distributor finance schemes, or equity from a partner with complementary services.
Underwriting
What lenders check in an IT business
01
Monthly recurring revenue
and its growth, with how much is under contract and for how long.
02
Contract terms
Minimum terms, notice periods, auto-renewal and termination rights.
03
Customer concentration
Whether one client, often a large local employer or a public body, accounts for a big share of revenue.
04
Gross margin by stream
, and whether engineers are fully utilised or the business carries spare capacity.
05
Key-person risk
Many MSPs depend on a founder who holds the client relationships and the technical knowledge.
06
Distributor relationships
Credit limits, payment record and any stop on accounts.
07
Security credentials
Cyber Essentials certification is required for some government contracts and increasingly by private clients. A lender lending to a firm that manages other businesses' systems will want to see that its own house is in order, including its professional indemnity and cyber insurance.
Checklist
Documents to have ready
- Two years of accounts, and management accounts that split revenue and margin by income stream
- Six months of business bank statements
- A report from your PSA or billing system showing recurring revenue by client and contract end dates
- Your standard managed-service agreement and any large client contracts
- Distributor statements and credit limits
- Aged debtors and creditors
- For acquisitions, heads of terms and the target's client and revenue data
How an IT services business makes money, as a lender sees it
Lenders split an MSP's income into streams, because each carries different risk.
| Income stream | Typical pattern | How lenders view it |
|---|---|---|
| Managed services | Per-user or per-device monthly fees on contracts | The core of the credit case; valued for predictability |
| Projects | Migrations, refreshes and installs billed on milestones | Useful margin but lumpy and dependent on the pipeline |
| Hardware resale | Bought from distribution, resold at a modest margin | Large turnover, small profit, adds debtor and supplier risk |
| Licensing resale | Cloud and software subscriptions rebilled monthly or annually | Recurring, but you may owe the distributor even if the customer does not pay |
For illustration, a business turning over £3 million with £1.2 million of contracted managed-service revenue is a stronger credit than one with the same turnover made mostly of hardware sales, even if profits look similar. Showing that split clearly is often the most useful thing you can do before applying.
For a wider view across software, telecoms, digital agencies and media firms, our guide to technology business loans matches each business model to the finance lenders usually consider.
The broker’s view
How we help IT services firms
We start by separating your recurring, project, hardware and licence income, because that shapes which lenders on our panel will engage and how much they can consider. We then approach suitable lenders, present your recurring revenue in the form each uses, and compare offers with you on cost, term and guarantees. Lenders make the final decision. It is free to enquire; any broker fee is disclosed separately before you proceed.
FAQs
Questions clients ask
How much can a managed service provider borrow?
There is no fixed formula. Lenders look at profit, the level and quality of contracted recurring revenue, existing debt and the directors' credit. Firms with a high share of contracted managed-service revenue and low churn can generally support more borrowing than their turnover alone suggests.
Can I get finance to fund a large hardware order for a client?
Often, through a revolving facility, invoice finance once the hardware is delivered, or by arranging for the client to lease the equipment so the lessor pays you directly. Lenders will look at the client's credit standing and your margin on the deal.
Do I need Cyber Essentials to get finance?
Lenders do not generally make it a condition of lending, but many public sector and larger private clients require it from their IT suppliers. Holding it supports the stability of your contracts, which lenders do take into account.
Can IT company finance be used to buy another MSP?
Yes, IT company finance can fund the purchase of another managed service provider, usually through acquisition finance based on the target's contracted recurring revenue and profit. Lenders look at contract length, customer churn, how the client base will transfer and your own track record. Expect a buyer contribution and often a personal guarantee. Our page on acquisition finance explains how purchases are typically structured.
Can a new IT company get finance?
A new IT company can get finance, but choice is narrower until it has trading history. Asset finance for hardware and smaller unsecured loans with a personal guarantee are the usual starting points. Signed managed-service contracts and a clear cash flow forecast help lenders see future income. Our page on start-up business loans explains what lenders look for in younger businesses.
Can I get instant quotes for IT company finance?
Instant Quotes shows which lenders on our panel are likely to fit your IT business, with no credit search. The lender then looks at your recurring contracts and accounts before confirming terms.
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What our clients say
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