How do I secure lending to acquire a financial practice?

Are you a financial advisor looking to acquire a new practice but need financing to get started? The process of securing a loan can seem daunting, but understanding the key qualifications for an SBA loan for a financial advisor practice is the first step toward a successful acquisition.

In this guide, we break down what factors into a lender's decision and explain how AdvisorLaw's expertise can help you navigate the process.

Key Factors for SBA Loan Qualification

According to lending experts, including AdvisorLaw’s Tad Burton, J.D., here are the primary factors that determine whether an advisor can qualify for an SBA loan:

• Practice Valuation: Lenders will assess the value of your current practice and the practice you are looking to acquire. This includes an analysis of how each generates revenue.
• Revenue Model: The type of revenue is critical. Lenders prioritize practices with a high percentage of recurring revenue (e.g., from AUM fees) as it indicates a stable and predictable cash flow.
• Credit Score: Your personal and business credit scores are a major factor in demonstrating your creditworthiness and ability to repay the loan.
• Down Payment & Financials: You will need to provide a down payment and be prepared to submit your tax returns and financial statements from the past few years to prove your financial health.

A significant hurdle for many financial advisors seeking a loan is that traditional local banks often lack a clear understanding of the financial advisory business model. They may not fully grasp how a practice is organized or how an advisor is compensated. This gap in understanding can lead to delays or even a denial of the loan.

AdvisorLaw specializes in bridging the gap between financial advisors and lenders. We understand the specific nuances of the RIA and financial advisory industry. Our expertise allows us to effectively communicate the value of your practice to lenders, helping you get your transaction closed.

Our comprehensive services for advisors looking to acquire a practice include:

• Integrated Lending Options & SBA Loans: We offer solutions tailored to your unique situation, including expert guidance on securing an SBA loan.
• Book of Business Valuation: We can help you determine what a practice is worth, so that you get a fair and accurate valuation that strengthens your loan application.
• Succession Planning Guidance: Our team provides strategic guidance on RIA succession planning, which is often a key component of a successful acquisition.
• Negotiation & Transaction Management: We leverage our expertise to ensure a smooth, end-to-end process from initial consultation to closing.

By partnering with AdvisorLaw, you can confidently navigate the complexities of securing financing and ensure a successful acquisition that aligns with your professional and financial goals.