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A Blog dedicated the latest happenings in the accounting practice sales industry. Including new CPA and accounting practice listings for sale. |
There is no question that anyone selling their accounting practice is going to want to receive a sizeable down payment at closing; if not, I would be weary of the practice and that should raise some red flags.
Well if you are looking to buy an accounting or tax practice how do you get that money:
- You can use your own cash
- Borrow from family or friend
- Let the seller hold the paper
- Use bank financing
Bank financing is by far the most popular answer regarding the practices that we sell. There are some conventional options out there as well as SBA possibilities. As buyer trying to start a new practice, the last thing you need to worry about is cash flow. Borrowing money will help alleviate some of these fears. By financing the transaction you will obviously help keep more of your personal cash on hand. Most lenders will not only lend money for the acquisition but will also lend additional monies for working capital. This is important. This will help the buyer to keep cash on hand during the first few months. Even though work is done and the billing is sent out, it still may take a couple of months to start collecting on those invoices. Obviously the overhead and payroll expenses will not wait a couple of months before they are due. By using bank financing for the accounting practice sale you will also be able to increase your offer to the seller. Most sellers are looking for a strong down payment at closing. This helps the seller know that you are committed to this transaction. Anyone can buy the practice for a percentage of collections over time because there is limited risk to the buyer and most of the risk is transferred to the seller. Putting forth a strong cash down payment at closing can help increase your offer and chances of the seller accepting it. Overall, bank financing is a benefit to both the seller and the buyer!
