Is it better for the firm or the incoming partner to borrow?

It depends on objectives and affordability. Firm-level borrowing spreads cost across the practice but increases leverage; individual buy-in loans keep debt with the incoming partner but rely on personal affordability from expected drawings.

What types of finance can fund a partner buy-in?

Common routes include business term loans, unsecured partner equity loans, asset-backed lending, revolving credit facilities, invoice finance, and vendor-deferred consideration. The right option depends on cash flow, security and timing.

How long does a partner buy-in or succession funding take?

Simple cases can complete in a few weeks once documentation is ready. Complex structures or secured facilities can take longer due to valuations, legal work and coordination with the partnership agreement.

Are interest and fees tax-deductible?

Tax treatment varies with structure and individual circumstances. Seek advice from a qualified accountant to confirm the deductibility of interest and the accounting for capital accounts and distributions.

Can government-backed schemes help with buy-ins?

Some accredited lenders may support eligible SMEs through the Growth Guarantee Scheme for working capital and investment purposes. Eligibility and terms vary, and the guarantee is to the lender, not the borrower.

Do lenders require personal guarantees from partners?

Often yes, especially for unsecured or partially secured facilities. Requirements depend on the lender’s risk assessment, the facility type, and the firm’s financial strength.

Can partners use funding for capital contributions, buy-ins or succession planning?

Q: Can partners use funding for capital contributions, buy-ins or succession planning?

Yes. UK lenders and specialist brokers regularly support partner capital contributions, buy-ins and succession events, provided the structure is appropriate and affordable. Funding may be at firm level or individual partner level.

The short answer and what it covers

Yes — partners can use business funding for capital contributions, partner buy-ins, and succession planning, provided the structure is appropriate and affordable for the firm and the individuals involved. The most suitable route depends on whether the borrowing is taken by the partnership/LLP/company or by the incoming/outgoing partner personally. Lenders in the UK routinely support these events in professional practices and other established SMEs.

In practice, this type of finance can help a new partner purchase equity, enable retiring partners to be paid out, or rebalance capital accounts to support growth and working capital. The key is aligning the purpose, structure, term and security with the firm’s cash flow, partnership agreement, and regulatory obligations. With the right planning, these transactions can be completed in weeks, not months.

Best Business Loans is an independent introducer that helps UK businesses connect with suitable lenders and brokers for these scenarios. We do not lend directly, and nothing here is financial or legal advice; please seek professional advice specific to your situation.

What do “capital contributions”, “buy-ins” and “succession” mean?

Capital contributions are funds partners commit to the firm to support working capital, investment, or regulatory capital needs. A partner buy-in is when an individual acquires an equity stake and joins the partnership or LLP as a partner or member. Succession planning covers planned transitions such as partner retirements, management buy‑outs (MBO), management buy‑ins (MBI), and handovers to the next generation of owners.

Who typically uses this funding?

Common users include professional services firms such as accountants, architects, engineers, surveyors, consultants, healthcare practices, and law firms. Established SMEs in manufacturing, logistics, and services also use these structures to manage ownership transitions. Lenders generally favour firms with a stable earnings record and predictable cash flows.

Funding options that can work for partner events

There is no one-size-fits-all answer; the suitable option depends on risk appetite, security, and repayment capacity. Below are commonly used forms of finance for partner capital, buy‑ins, and succession events. Each has pros and cons, and lenders’ criteria vary.

Business term loans (firm-level borrowing)

A term loan to the partnership/LLP/company can fund a retiring partner’s payout or top up working capital after capital account changes. Terms often range from 12 to 60 months, sometimes longer with asset security. Repayments come from the firm’s cash flow, so affordability and headroom analysis are essential.

Unsecured partner equity loans (individual borrowing)

Some lenders offer loans directly to the incoming partner to finance their buy-in. These are typically unsecured or supported by personal guarantees, with affordability tested against the partner’s expected drawings. This route avoids increasing the firm’s debt, but the individual bears repayment responsibility.

Secured loans and asset-backed lending

Where appropriate, a loan secured by business assets (or occasionally personal assets) can offer longer terms and potentially sharper pricing. Security may include a debenture over the firm, charges over equipment, or legal charges over property owned by the business. Lenders will assess asset values and serviceability.

Revolving credit facilities and overdrafts

For short-term needs or staged payments, a revolving credit facility (RCF) or overdraft can be used to bridge timing gaps. These facilities are flexible but typically more expensive than term loans if used long term. They can complement a structured succession plan by smoothing cash flow.

Invoice finance and working capital solutions

If the firm invoices other businesses on terms, invoice discounting or factoring can release cash to support capital adjustments. This suits firms with reliable debtor books and spreads risk across receivables rather than concentrating it in a single lump-sum loan.

Vendor finance and deferred consideration

Outgoing partners may accept deferred consideration paid over time, sometimes with interest. This can be paired with a smaller initial loan to reduce pressure on cash flow. Documentation should clearly set out triggers, covenants, and dispute mechanisms.

Growth Guarantee Scheme (GGS) support

Eligible UK SMEs may access loans backed by the Growth Guarantee Scheme via accredited lenders, which can support working capital, investment, and refinancing. Availability and terms depend on the lender’s policy and your eligibility. Guarantees are to the lender, not to you, and borrowing remains your responsibility.

Eligibility, structure and legal considerations

The structure underpins lender appetite and pricing. Consider who borrows, what security is offered, and how repayments will be serviced under realistic scenarios. Early alignment with your partnership agreement and advisers saves time and reduces risk of rework.

Who should borrow — the firm or the partner?

Borrowing at the firm level can simplify control and standardise costs across partners, but it increases the business’s leverage. Borrowing at the individual level isolates the debt to the incoming partner, but affordability hinges on drawings and tax. Many practices use a hybrid approach, pairing a modest firm loan with an individual buy‑in facility.

Security, guarantees and affordability

Expect lenders to assess profit stability, cash conversion, and stress scenarios after the transaction completes. Security may include personal guarantees from equity partners, fixed/floating charges over assets, or negative pledges. Robust forecasts, capital account schedules, and partnership resolutions help demonstrate governance and serviceability.

Tax, accounting and regulatory notes

Capital and drawings arrangements have tax and accounting consequences for both the firm and partners. Seek advice from a qualified accountant or solicitor to confirm treatment of interest, reliefs, and distributions. Professional practices should align with relevant regulatory requirements and their partnership/LLP agreement at all times.

Process, costs and risk management

Well-prepared applications move faster and achieve better outcomes. The typical journey includes scoping, documentation, credit assessment, offer, legal completion, and drawdown. Timelines vary by lender, complexity, and the availability of up‑to‑date financials.

Typical steps to secure funding

Clarify purpose and structure: firm vs individual borrowing, amount, and term.
Prepare financials: last 2–3 years’ accounts, recent management figures, cash flow forecasts, partner capital schedule, and debt summary.
Document governance: partnership resolutions, buy‑in/buy‑out terms, updated deed or members’ agreement.
Submit enquiry: provide a clear rationale, sources and uses of funds, and repayment plan.
Credit and diligence: respond swiftly to information requests and security requirements.
Legal completion: review facility letters, covenants, guarantees, and security documentation.

Costs and terms you might encounter

Interest: typically fixed or variable, with pricing based on risk, term, and security.
Fees: arrangement, legal, valuation (if applicable), and sometimes early repayment charges.
Covenants: information undertakings, leverage or debt‑service cover tests, and partner capital undertakings.

Risks and how to mitigate them

Concentration risk: avoid over‑borrowing for multiple events at once without headroom.
Cash flow strain: match loan term to partner exit timings and profit seasonality.
Partner misalignment: ensure transparent communication and documented approvals.

Who we help and how to start

We help established UK firms in sectors where partner structures are common, including professional services, healthcare, engineering, and asset‑rich SMEs. If you are a law firm planning partner transitions, see our dedicated guidance for solicitors loans and finance options. Our AI-led matching helps you connect with lenders and brokers who understand partnership dynamics.

What you can expect: an initial eligibility check, a shortlist of potential providers, and introductions to specialists who regularly fund capital contributions, buy‑ins and succession. You stay in control, compare options, and decide what fits your goals. It’s free to submit an enquiry, and there’s no obligation to proceed.

Get your free Quick Quote to explore suitable routes now. Best Business Loans is an independent introducer, not a lender, and does not provide financial, legal or tax advice. All funding is subject to status, creditworthiness, affordability, eligibility, and the lender’s final terms.

Key takeaways

Yes, partners can use funding for capital contributions, buy‑ins and succession planning when structured appropriately.
Options include firm‑level term loans, individual partner buy‑in loans, asset‑backed lending, invoice finance, and deferred consideration.
Plan early, document clearly, and align finance with your partnership agreement, forecasts, and risk appetite.
Seek qualified legal, tax and accounting advice before committing to any arrangement.
Use our Quick Quote to be matched with relevant UK lenders and brokers who work with partnership events.

Compliance and transparency

Information on this page is general and for UK businesses only. It is not a recommendation or advice; always seek independent professional guidance tailored to your circumstances. Marketing should be clear, fair and not misleading; we support that approach and aim to present balanced information, including risks and costs.

Updated: October 2025