How is the purchase of my shares by an EOT funded?

An EOT transaction is usually funded through a combination of cash already on the company’s balance sheet and a loan from the outgoing owners, known as a vendor loan. The loan is supported by a company guarantee, and the lender takes a charge over the company’s assets. Third party finance can also be arranged where it is needed.

The company then makes contributions to the trust — a contractual obligation — to pay interest and fees and to repay the loan out of future post-tax profits.