There are a number of different ways to finance the purchase of an accounting practice or CPA practice. Many are surprised when I elaborate how easy these are to get financed. Below you will find a brief discussion of the most common ways to fund your acquisition. 
Traditional Conventional Financing vs. Going through the SBA: Banks are what most people think of first when thinking about buying a business. Most banks are interested in financing acquisitions. The problem with traditional conventional financing is there are never enough hard assets within accounting firms to collateralize the acquisition. For this reason, most that are going through a bank will be going through the SBA (Small Business Administration). The SBA guarantees the bank at 75% for loans originated according to their standard operating procedures. For this reason, banks love to do SBA deals and accounting and CPA practices are no exception. SBA requires 15% equity injection, which can be a combination of buyer down, and seller carry for deals with less than $500,000 in good will. If over $500,000 in goodwill the requirement increases to 25%. The advantages to a buyer are a low down payment and a 10-year term to stretch out the cash flow requirements. The advantages to the seller are they will be largely cashed out at the end of the deal and not subject to retention.
Bank vs. Seller Carry: The other most common method we see of financing an acquisition is a seller carry. This is when the seller becomes the bank and takes a down payment and a promise to pay from the buyer. Often times, the seller will require more than the bank does for a down payment to mitigate their risk in the seller carry. This seller carry will increase the amount of risk the seller has in the deal but they are paid an interest rate on the loan terms and the seller can reap interest as well as principal on the acquisition. Many times this can also be helpful from a tax perspective. Buyer down payments can range from virtually nothing in a distressed sale to over 50% for a healthy practice with a strong infrastructure. The payment terms range from 2 years to 10 years depending on the cash flow in the firm and the size of the loan.
Be ready and willing to discuss your preference of financing: Before you decide to buy, you should look at your preferred method of financing and be willing to discuss that up front with sellers or accounting practice intermediaries. Most banks will even provide a pre-approval letter that can be used with sellers. Buying a practice is difficult to do but if you are considering this step, you will want to have your capital lined up in advance. Be sure to speak with a banker or an business intermediary that specializes in accounting practice or CPA practice acquisitions and understands the financing issues that will come with a financed purchase.
