Strategic Insight: How to Finance the Purchase of an Accounting Practice

One of the biggest misconceptions about buying an accounting firm is that you need a large amount of cash up front. You don’t. The truth is, at NCI, many successful acquisitions are completed using a combination of financing options designed specifically for professional practices.

Here are the most common ways accounting firm acquisitions are financed:

1. SBA Loans
SBA financing remains one of the most popular options for acquiring an accounting practice. In many cases, buyers can finance a significant portion of the purchase price with terms that make the transaction cash-flow friendly.

Typically, SBA loans for accounting firm acquisitions feature:

• Repayment terms of up to 10 years
• Competitive interest rates
• Lower down payment requirements compared to conventional loans
• The ability to finance goodwill, working capital, and closing costs

Because accounting firms generally have recurring revenue and stable client relationships, lenders are often open to financing accounting firm purchases. In such circumstances, buyers are usually evaluated based upon a combination of their experience operating/managing an accounting practice, creditworthiness, liquidity, and the cash flow of the practice being acquired. This last point is weighted heavily in the SBA lending process. Lenders also like to see the seller remain actively involved with the firm for a defined transition period to help ensure client retention and a smooth handoff. It’s also worth noting that if real estate is included in the sale the buyer can receive a blended interest rate and a payback period of up to 25 years.

At NCI, we have worked with and can highly recommend a first-rate SBA lender who deals exclusively in accounting practice sales. Feel free to contact us for a referral; we’ll put you in touch with this proven resource to help you realize your practice acquisition goals.

2. Seller Financing
In many accounting practice sales, the seller finances a portion of the purchase price. This can help bridge valuation gaps, improve cash flow for the buyer, and demonstrate the seller’s confidence in client retention.

Many of the acquisitions we facilitate at NCI include a 10% seller guarantee. This means that 10% of the guaranteed gross revenue in the first year after closing (which is also a portion of the purchase price) is set aside in an escrow account at closing. Then, 12 months after closing, the buyer and the seller review the performance of the firm; any client attrition or loss of business is refunded to the buyer from the money in the escrow account, up to a maximum of 10% of the projected gross. The remaining money in the account goes to the seller, thereby completing the transaction.

3. Earnouts & Performance-Based Payments
Some practice sale deals include payments tied to client retention or future revenue performance. These structures can align incentives and reduce risk for both parties. Private Equity buyers often include performance-based earnouts as part of their deal structure. Doing so can be a great way to incentivize sellers to grow the practice during the transition period, often using resources provided by the acquiring PE group. This ends up being a win/win, since the seller will receive an increased purchase price and the buyer obtains a larger business with additional revenue.

4. Partner Buy-Ins or Outside Investors
In larger acquisitions, buyers may bring in partners or investors to help fund the transaction and support future growth.

A partner buy-in typically involves another CPA or experienced operator contributing capital in exchange for an ownership stake in the firm. This approach can reduce the financial burden on a single buyer while also bringing complementary skills and/or operational support to the business.

Outside investors may also participate in acquisitions, particularly when a firm has strong recurring revenue, scalable systems, or high growth potential. In some cases, investors provide capital for expansion while the CPA buyer continues to manage day-to-day operations and client
relationships. An investor-buyer who is not an accountant will need to hire one to fill the official role of the departing seller. This is an important consideration; it adds a significant cost that is not part of the sale—as compared to a more traditional buyer who is an accountant.

In the end, financing is only part of a practice sale equation. A successful acquisition also requires proper valuation, deal structure, due diligence, and transition planning. It sounds like a lot, and it is, which is why NCI is here to help!

Thinking about buying or selling an accounting practice?
At New Clients, Inc., we help buyers and sellers navigate every stage of the transaction process—from valuation and financing guidance to negotiations and closing.

If you’re exploring an acquisition or considering selling your firm, let’s start with a confidential conversation.

Email Chris Clark – chrisclarknci@gmail.com – or call me at 856-404-0949 to schedule a consultation today.