Lately we have been talking with our lending partners about the various accounting practice acquisition loan programs which do change from time to time.
Below are my overall impressions of the current lending environment:
Slowly but surely banks are becoming more willing to lend. Their appetite for loans is increasing. Nothing crazy going on here, but this is good news. We brokered deals right through the worst of the recession and it’s nice to see banks loosen up a little.
Underwriting has gotten smarter
Years of operating in a tough environment seems to have made loan underwriting departments a bit less bureaucratic and more thoughtful in their approach. That’s not to say there aren’t a few hoops to go through, but it has helped to refocus underwriting departments on what matters most which is:
- Cash flow of the practice
- Professional background and experience of the buyer
- Liquidity and credit score
They are also clearer about what they will and won’t do. We are hoping that this means we can get approvals and denials back more quickly.
The bottom line for buyers
Successfully getting a deal financed requires:
- Conservative and well thought-out projections for the practice after the change of ownership which clearly demonstrate enough cash flow to owner to support debt service as well as personal living expenses.
- Good history of responsible use of credit.
- Selecting an accounting practice suitable to your professional background.
- Some down payment money…typically 5 – 10% at a minimum. There are exceptions.
About Brannon Poe: Brannon is the founder of Poe Group Advisors and has been facilitating successful accounting practice transitions throughout the US and Canada since 2003. He is also the creator of Accounting Practice Academy. Brannon is the author of the Accounting Practice Insights Blog and hosts the Accountant’s Flight Plan” podcast with other top thought-leaders in the accounting profession. Brannon is an E&Y alumnus. He has worked with some of the most successful and seasoned CPAs in the industry and has been privy to the behind-the-scenes methods that these clients have used to build highly profitable practices along with capable and independent teams. Brannon has authored multiple books, including Accountant’s Flight Plan – Best Practices for Today’s Firms (published by both the AICPA and CPA Canada) and On Your Own: How to Start Your Own CPA Firm, Second Edition (published by the AICPA). Brannon is passionate about entrepreneurship and is the president-elect of EO Charleston (Entrepreneur’s Organization)