If you’re in the process of selling your accounting firm—or thinking about it—you’ve probably heard about promissory notes. The name might sound dull, but in the world of buying and selling professional practices, this tool can be the key to getting your deal done.
What Is a Promissory Note (and Why It’s a Game-Changer in Firm Sales)?
A promissory note is, simply put, a legal promise to pay. When selling your accounting firm, it can help bridge the gap between your asking price and the buyer’s offer.
For example, you want $1.2 million for your CPA firm. The buyer is offering $1 million. Instead of walking away, use a promissory note to close the gap. That remaining $200K? It can be structured as a contingent payment—payable only if the firm hits performance goals post-sale. This is called a retention adjustment, and it keeps both parties aligned on the firm’s future.
Structure Matters—Especially for SBA Loans
Promissory notes are incredibly flexible. Selling to a buyer using SBA financing? You can carve up a note so that $50K serves as their required equity injection (with a 24-month standby), and the rest is split into separate notes with custom terms.
Lenders care about how the “equity” portion is structured, but often give more leeway on the rest. It’s a strategic way to keep your deal compliant—and attractive to financing partners.
Notes vs. Earn-Outs: Why Simplicity Wins
Earn-outs are complex. They involve escrow accounts, third-party oversight, and too much red tape. Promissory notes? They’re simple. Draft them, sign them, and go. That matters when you’re running a firm, managing a team, or planning your next chapter.
For sellers of accounting firms, promissory notes allow you to build in conditional payments—without the stress of ongoing post-sale entanglements.
That said, if you’re the seller, there’s comfort in knowing money is secured in an escrow. Every deal has trade-offs—choose the one that fits your priorities.
The Bottom Line: Be Strategic
Promissory notes aren’t one-size-fits-all. You can structure multiple notes with different terms. Don’t let a buyer—or a bank—convince you there’s only one way to do it.
If you’re preparing to sell your accounting practice, having the right deal structure is just as important as the right buyer.