Ask two different questions
The valuation asks what the defined business interest is worth on the agreed basis. The funding model asks how a proposed price and transaction costs might be paid. A limit on available borrowing does not, by itself, establish the business value. Equally, a valuation conclusion does not demonstrate that a funding package will be available.
Build sources and uses before a repayment model
List the purchase consideration, fees and other planned transaction funding needs. Then identify proposed sources such as management equity, external investment, borrowing or deferred seller consideration. Distinguish committed amounts from assumptions. An unexplained gap should remain visible rather than being treated as an automatic loan.
Keep operating cash in the picture
Illustration only: a model shows £150,000 cash generated before investment and financing, but assumes £100,000 repayments and £80,000 investment. That combination leaves a £30,000 gap before any other changes. The example is not an affordability test; it shows why a profit multiple cannot replace a cash schedule.
Agree the workstreams
The transaction team may need valuation, financial due diligence, modelling, legal and tax input. Define responsibilities and make sure assumptions are shared consistently. Lenders and investors make their own decisions. No valuation report guarantees credit approval or establishes that a proposed deal is suitable for the participants.
Prepare for the conversation
- Separate valuation assumptions from financing assumptions.
- Identify committed funding and unresolved gaps.
- Test repayments alongside investment and operating cash.
Further reading: British Business Bank: what is a management buyout?.
General preparation guidance, not a valuation opinion or legal or tax advice. Any assignment is subject to an agreed scope, suitability and intended-use review. Examples are illustrative, not client cases.