What Makes a Business Attractive to Funders?

A funder is most keen when the business in question has a decent length of trading history, steady or strong profit growth, healthy cash generation and a positive balance sheet.

In terms of the balance sheet, businesses with a range of assets that can be leveraged are always of interest. Land and buildings, stock, debtors, and plant and machinery are all asset classes that will assist a funder when considering a funding package.

That said, a business without land and buildings and/or plant and machinery can still be attractive. Funders will look at the business as a whole – how it sits in its market or sector, and the potential for future growth.

Key Characteristics Funders Look For

Aside from the asset position, there are several specific factors which, if present, strengthen the case for a private buyer approaching a funder with a potential transaction. These include:

• A business that has been in existence for over 10 years with a solid foundation and track record
  
  

• A business that has been for sale for over 6 months and has likely exhausted the option of a trade or private equity sale  
  
  

• A solid balance sheet, with net assets in excess of £250,000 
  
  

• A genuine retirement sale 
  
  

• A paternalistic owner who wants to leave a legacy rather than simply maximise price 
  
  

• A business where the owner may consider selling less than 100% of the equity
  
  

• Stable or growing profits, typically above £250,000 and below £1m per annum
    

• Positive cash generation 
  
  

• Clear visibility of future growth for the incoming buyer 
  
  

• A high‑calibre and long‑standing second‑tier management team  

If many of the above are present, there is a strong chance of a funder being interested in taking a serious look at the transaction.

Paternalistic Owners and Legacy‑Driven Sales

A paternalistic owner can be particularly attractive from a funding perspective. Such an owner may not wish to sell to a trade buyer for the highest possible price, but instead wants:

• Continuity of trade at the existing site 
  
  

• Full staff retention 
  
  

• “Business as usual” after completion  

A private buyer is often better placed than a trade acquirer to offer this kind of continuity, which can help support a more constructive negotiation and a funder‑friendly deal structure.

Retirement Sales and Realistic Price Expectations

A true retirement sale is another positive indicator. Owners who are genuinely exiting the business for retirement often have more realistic price expectations, which can:

• Increase the likelihood of agreeing on a sensible valuation 
  
  

• Improve the probability of completing a transaction that works for both the buyer and the funder  

Importance of a Robust Marketing and Growth Strategy

For any business under consideration, funders will want to see that the buyer has a clear marketing and growth strategy. Demonstrating:

• How do you plan to grow revenue and profit?
  
  

• Which markets, segments or products will you prioritise? 
  
  

• How will you resource and execute the plan?  

This gives the funder comfort that their loan or investment can be repaid with minimal risk.

Minimum EBITDA and Deal Size Requirements

Typically, any business being considered by a funder will have:

• Turnover of at least £1m; and 
  
  

• Corresponding profits / adjusted EBITDA of over £250,000  

There are practical reasons for this. Funders have minimum lend levels, so smaller transactions may not meet their internal thresholds. For example:

• Some funders have a minimum loan of £500,000 
  
  

• Others may require a minimum loan of £1m 
  
  

• Some apply a minimum EBITDA threshold (e.g. £500,000), below which they will not consider the opportunity  

The fixed costs of assessing, structuring and monitoring a transaction mean very small deals can be uneconomic for many funders, regardless of how attractive the business might otherwise appear.