CASH FLOW IS KING – NOT JUST REVENUE!
Lenders and buyers alike focus heavily on cash flow (SDE/adjusted net income) rather than just gross revenue. A practice with strong, consistent profitability and clean financials will qualify more easily for financing, command stronger loan terms, and support higher valuation multiples.
FINANCING IS READILY AVAILABLE – BUT BUYER STRENGTH MATTERS!
Many buyers assume financing will be difficult, but lenders (especially SBA lenders) are very comfortable with accounting practices due to their recurring revenue, high client retention, and predictable cash flow. However, approval depends heavily on the buyer’s profile including industry experience, creditworthiness, and ability to operate the practice post closing.
DEAL STRUCTURE CAN MAKE OR BREAK FINANCING!
The structure of the deal plays a major role in whether financing gets approved. Elements that help deals move forward include reasonable purchase price aligned with market multiples, seller participation (e.g., short-term transition support or partial financing), and realistic transition plans to retain client.
Key Takeaways
- Conventional loans are often faster and have lower closing costs, but are only available in certain geographic areas.
- SBA loans are more accommodating for accounting practice acquisitions where goodwill and cash flow are primary assets, though the process takes a little longer.
| Feature | Conventional Loan | SBA Loan |
|---|---|---|
| Typical Down Payment | 10–20% | 10–20% |
| Loan Terms | 5–10 years | 7–10 years (up to 25 for real estate) |
| Interest Rates | Often lower, fixed or variable | Typically variable, tied to prime |
| Loan Process Time | Faster (4–6 weeks) | Longer (6–10 weeks) |
| Collateral Requirements | Typically practice + assets | May require additional real estate collateral |
| Eligibility | Strong credit & financials | Credit, experience & business plan |
| Flexibility | Less flexible | More flexible structure |
| Ideal For | Existing practice owners | First-time buyers |