What are the Best Financing Options to Purchase a CPA Practice?

There’s no doubt that now is a great time to purchase a CPA practice. The tax laws have never been more complicated, and businesses will increasingly seek out the advice of CPA’s to keep their tax liabilities lower. Furthermore, there is an abundance of CPA practices available right now due to demographic trends – accountants as a whole are aging faster than the general population.

When it comes time to buy your practice, one of the biggest considerations is how to obtain financing. An existing CPA office will already have an established location, employees, office equipment, and most importantly existing clientele. This will make the price tag quite a bit higher than starting from scratch out of your home office, and you will probably need to finance a large chunk of the purchase.

When it comes to financing a new CPA practice, there are generally two ways to go about it:

1. Seller Financing. If your seller is willing, this can be a mutually beneficial way to transfer ownership of the practice. For the seller, it provides them steady income over an extended period at an interest rate they would be unlikely to get with a CD at the bank. Additionally, the seller already knows that this is a viable business model, because he/she is the one that built it.

For the buyer, this is a nice option as well, because they can avoid all of the bank qualification requirements. Another benefit to the buyer is that when the seller is self-financing, it is in his/her best interest to see to it that the practice succeeds. This means a higher level of engagement, which helps ensure a smoother transition and a greater chance of client retention.

2. Bank Financing. Conventional financing is accessible when buying into a CPA practice. The SBA generally approves loans of up to 85% of the value of the business, with the buyer needing to come up with 15% down. There are some requirements that need to be met to qualify, but they are mainly to insure that the practice is viable, and you wouldn’t want to buy it if it weren’t anyway.

In addition, several banks have developed new loan products that specifically cater to the CPA. These new financial tools can help greatly in the structure of an acquisition.

Regardless of which type of financing you use, be sure to work with a business brokerage firm with expertise in buying/selling accounting practices. This way, you can be assured that all your “I’s” are dotted and “T’s” crossed when you enter into your own practice.

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