Financing the Purchase of an Accounting or CPA Practice

Many CPAs and accountants ask me if there are financing packages available to purchase a new CPA firm.  There are multiple ways to finance the purchase of a CPA practice but the two most common are Seller Carry and SBA (Small Business Administration) financing. Below, I will describe each method.

Seller Carry
In a seller carry, the buyer puts a modest amount of money down as a down payment and the balance of the practice is carried by the seller. In other words the seller is the bank and holds the note. The buyer makes regular (usually monthly) payments that are amortized at a competitive interest rate over a period of years. The popularity of this financing method has grown because it allows the buyer to insert a retention clause into the contract. If retention falls and corresponding revenue falls, the buyer can adjust the note balance down and pay only for the business that was retained under the new ownership.

SBA Financing
The SBA is also a common path to finance the purchase of an accounting practice.  Conventional bank lending cannot accommodate a CPA practice because there are not sufficient hard assets the bank can take as collateral. The SBA, on the other hand, can and will finance accounting and accounting practice acquisitions. This is a popular method as well because it requires very little down payment. SBA only requires an equity injection be made in the amount of 15% for most practices which can be a combination of buyer down payment and seller carry. The bank also addresses any start up or seasonal cash flow issues that may arise.  They generally provide a line of credit to help with those working capital needs.

My job is to help you asses your finances and determine your best course of action to accomplish the purchase. If you have any questions – no matter where you are in the process – feel free to contact me.

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