Investment Structure Advice - (UK)

I would welcome any comments on my proposed investment structure below. It is simple and hopefully appealing to long-term investors. We will be acquiring a UK small privately owned business to deliver long-term cash flow generation. The target is an established business generating £750K–£1.5M in EBITDA, with a strong growth profile, acquired at a valuation multiple of less than 4.5x. Investors will provide capital through interest-free loans, repayable over an eight-year term with flexibility for accelerated repayment. Loan repayments should be tax-free. Upon full repayment, investors will collectively own 80% of the business equity, with the remaining 20% retained by the Founder and management team. Following the loan repayment, shareholders will benefit from regular distributions of free cash flow. The expected post-repayment yield is 15%+ annually on the original loan commitment. Investors are encouraged to approach this opportunity with a 15-year investment horizon. Annual liquidity windows will be available post-loan repayment, based on a pre-agreed EBITDA multiple applied to the proceeding two-year average EBITDA. To illustrate the potential returns: for a business acquired at 4.5x: • Base Case (10% annual EBITDA growth): IRR of 32% over 8 years, assuming a multiple expansion to 5.5x as EBITDA exceeds £2.4M. • Downside Case (5% growth): IRR of 26%. • Upside Case (15% growth): IRR of 38%. The Founder and management only realise value from their 20% equity stake post full repayment of investor loans. The Founder will personally invest a minimum of 25% of the total loan requirement, ensuring strong alignment with external investors. No external debt will be introduced beyond the investor loans.