Funding a £3.5m purchase

The situation

A source illustration starts with a business earning £1m annually and a £3.5m purchase price. It proposes £2m from a bank, £1m left with the seller as deferred consideration and £0.5m of equity. This is a hypothetical financing explanation, not evidence of a completed acquisition. The source calls the denominator profit; it should not silently become EBITDA or free cash flow. Watch source

Follow the money

Component	Amount	Share of price
Bank borrowing	£2,000,000	57.14%
Deferred seller price	£1,000,000	28.57%
Equity contribution	£500,000	14.29%
Total	£3,500,000	100%

The percentages are editorial calculations, rounded to two decimals. The key subtraction is £3.5m minus £2m minus £1m, leaving £0.5m equity for the stated price. The deferred £1m is still consideration owed; it merely changes when the seller receives it. An equity investor supplying £0.5m does not automatically own 14.29% of the business. Funding proportions and negotiated ownership answer different questions.

What the arithmetic does not establish

This price-only table omits fees, operating cash and any completion adjustments. It also contains no interest rate, repayment schedule or seller-ranking terms. It therefore cannot prove affordability or the total cash required at completion. A lender’s provisional willingness to provide £2m is not released funds, while investor equity remains a separate commitment to obtain.

A second £3.5m illustration elsewhere in the collection uses £2.5m bank debt and only £0.5m seller finance. Keep those alternatives separate rather than mixing their schedules. The practical next step is to add all uses of cash, confirm which funding is available and build the post-completion payment calendar. Start with capital-stack mechanics and compare the debt-service example.