IT company finance for managed service providers and IT support firms

Yes. The purchase is funded one of two ways. The remaining director borrows, personally or through a holding company, to buy the shares, or the company buys its own shares back and cancels them, with a loan to the company covering the price. Lenders size either route on the MSP's contracted recurring revenue and profit, the same measure they use for an acquisition, and they want to see that the leaving founder's client relationships and technical knowledge are handed over before completion, with a handover period and restrictive covenants in the share purchase agreement. A valuation agreed between the parties, the accounts and the recurring revenue report from the billing system are the core of the application. We arrange shareholder buyout finance for IT services firms, including structures where part of the price is deferred and paid from the company's cash flow after completion.

Can the company buy back the leaving founder's shares itself?

Yes, within the Companies Act 2006. Section 690 lets a limited company buy its own shares subject to its articles, section 691 requires the shares to be fully paid and paid for on purchase, and section 692 says the purchase must be funded from distributable profits or the proceeds of a fresh share issue, with a private company also allowed a small payment out of capital, capped in each financial year at the lower of £15,000 or 5% of the nominal value of its fully paid share capital if its articles permit. The contract has to be approved by a resolution of the members before it is entered into, and the seller cannot vote on it.

• Distributable profits. An MSP that has paid most of its profit out as dividends may not have the reserves to cover the price, which is when the loan to the director route is used instead.
• Paid on purchase. Because the company must pay for the shares when it buys them, a company buyback cannot run on instalments in the way a sale to the other director can.
• Out of capital. A private company can go further under Chapter 5, with a directors' statement on solvency with an auditor's report, a special resolution, a Gazette notice, five weeks for creditors to object and payment between five and seven weeks after the resolution.
• Tax on the seller. How the leaving founder's proceeds are taxed depends on the route, so take accountancy advice before the heads of terms are signed.

The rules are in Part 18 of the Companies Act 2006. Our shareholder buyout finance page covers both routes in detail, and management buyout finance the case where a team buys the founders out. Instant Quotes shows which panel lenders fund buyouts before any credit search.

Yes. Winning a council, NHS trust or central government contract usually means hiring engineers, buying hardware through distribution and paying for onboarding months before the first monthly invoice is settled, and an award letter is strong evidence for a lender. A working capital loan or revolving facility covers the mobilisation, invoice finance funds the invoices once the service is delivered and accepted, and hardware can go on the client's own leasing. Lenders read the contract for its term, termination rights and payment terms, and lenders often view public sector debtors favourably because the 30 day term is implied by statute. We arrange facilities for MSPs taking on public sector work, including invoice finance that funds a single large contract alongside the firm's private sector billing.

How quickly does a public sector client have to pay an IT supplier?

Within 30 days. Since 24 February 2025 the Procurement Act 2023 has implied payment terms into public contracts. Section 68 requires any sum due under the contract to be paid before the end of 30 days beginning with the day the authority receives the invoice or, if later, the day payment falls due under the invoice, and a contract term that restricts or overrides this has no effect. The term does not apply where the authority considers the invoice invalid or disputes it, and in that case it must tell the supplier without undue delay.

• A valid invoice. An electronic invoice in the required form, or one that gives the supplier's name, a description of the goods or services, the sum requested and a unique identification number, plus anything else the contract requires.
• Disputes. An invoice the authority disputes falls outside the 30 day term, so milestone acceptance and the sign off process need to be nailed down in the contract.
• Exceptions. Concession contracts, utilities contracts awarded by private utilities and contracts awarded by a school are outside section 68.
• Finding the work. Suppliers register on Find a Tender, the central digital platform, which is free to use and holds the firm's core details for bids.

Section 68 is on legislation.gov.uk and GOV.UK publishes a short guide for suppliers. Our invoice finance and working capital loans pages cover the two usual facilities. Instant Quotes lists panel lenders for IT services firms without a credit search.

• 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.

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.

• 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.