Financing an Accounting Practice Acquisition

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The Challenge of Securing a Cash Flow Loan

Securing a loan for the acquisition of an accounting practice can be a real challenge.  Most lenders may provide you with an initial yes, because they want your business, but in time will deny your loan because there simply isn’t enough collateral in an accounting practice to secure the loan and make them comfortable.  What you need is a lender that recognizes the value and stability of a tax and accounting practice and is willing to loan on the recurring cash flow the practice generates.  ProHorizons works with a variety of SBA and conventional lenders that specialize in funding accounting practice acquisitions.

Why Consider Outside Financing?

Benefits to You as the Buyer:

  • Extend Loan Terms/Improve Cash Flow. Anyone who owns a business knows the importance of cash flow. Through outside financing you can secure up to 10 year repayment terms which will dramatically reduce cash requirements compared to the 3 to 5 year terms required on most seller notes.
  • Preserve Your Cash. Securing a loan from an outside lender is the most reliable and successful method of funding an accounting practice acquisition without using all of your cash reserves.
  • Insure Sufficient Capitalization. In any business, particularly one with seasonality, having sufficient cash reserves to carry you through slower times is critical. This is even more important in the months following an acquisition. Depending on the circumstances we can sometimes secure working capital in addition to an acquisition loan to help new owners through those first few months.
  • Enhance Your Offer to the Seller. The seller, like you, desires to preserve cash. You honor this when you take the burden of funding off the seller, which means the acquisition is more likely to close and be successful. If you were selling your business, how much would you want up front?
  • Gain Autonomy. By providing a larger down payment through outside financing, you reduce the seller’s sense of risk and investment in the practice after transfer of ownership. This will result in more autonomy of ownership and decision making for you as the new owner, and enable the seller to focus on the transitional role of “advisor” rather than “creditor.”

Benefits to You as the Seller

  • More Cash at Closing. “A bird in the hand is better than two in the bush.” You can choose your favorite saying, the fact is there is more security and peace of mind when you get cash in hand.
  • Role Clarification.  The seller can focus transitioning and making the practice a success for the buyer, instead of being the bank, co-owner or other roles they may feel compelled to play if they carrry a significant amount of the sale on a promissory note.

How Can ProHorizons Help You?

If you are working with us on practice we represent for sale or if you engage us to advise you in your acquisition, we are going to work for you to secure the best loan possible. Having worked on and closed hundreds of loans over the past eight years we know the key barriers to securing financing and how to navigate the path to getting a loan closed. Our expertise is invaluable when serious loan issues arise. In addition, our very strong relationships with preferred lenders enable us to get responses and results in a more timely manner.

If you are not acquiring a practice we represent for sale, you can still gain access to our preferred lenders by contacting us.

Any questions?

Call Ken Berry, CBI at 408-598-3009 for a confidential conversation about your situation.

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