Professional practices

Finance to buy an accountancy practice: structuring a whole-firm purchase

See how buyers fund a whole accountancy firm, from share or asset purchase and holding company loans to deferred payments and working capital.

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In short

What you need to know.

Buying a whole accountancy firm is usually funded with a term loan sized on the combined practice's maintainable profit, the buyer's own money, and deferred payments to the seller that rank behind the lender.

Buying the shares or the trade and assets changes what you inherit, how much working capital you need after completion and what security the lender takes. Lenders focus on recurring fees, the seller's client relationships and your capacity to integrate the firm.

A transaction we arranged

£137,500

£137.5K to fund an accountancy practice acquisition.

An established firm had an acquisition agreed. We structured the funding around the transaction and got it completed.

Read the transaction

Sector: Accountancy
Structure: Acquisition facility
Outcome: Acquisition completed

About finance to buy an accountancy practice

Specialist knowledge. Better outcomes.

This page is for accountants and firm owners buying an entire practice.

This page is for accountants and firm owners buying an entire practice: a limited company, an LLP or a sole practitioner's business, complete with staff, systems and work in progress. That is a different transaction from picking up a client list, and it needs a different funding structure. Smart Funding Solutions is a broker, not a lender: we arrange acquisition funding from £10,000 to £20 million, by approaching lenders across the whole market that understand how professional firms earn. For the wider picture of how practices borrow, see our accountancy practice loans hub.

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How the purchase is usually funded

Senior term loan

The main borrowing, sized on the profit the combined practice can maintain, not on its fee turnover. It can be unsecured with personal guarantees or secured with a debenture over the business. Because the asset being bought is goodwill, repayment terms are generally shorter than for property-backed lending. The trade-off is higher monthly repayments in the years when you are also integrating the firm.

Government-backed lending

Certain lenders can back an acquisition loan with the British Business Bank's Growth Guarantee Scheme. The guarantee protects the lender, not you: you remain liable for the whole debt, and personal guarantees can still be required.

Deferred consideration and loan notes

Paying part of the price later reduces the amount you borrow up front and keeps the seller engaged in the handover. Lenders almost always require deferred payments and any vendor loan notes to rank behind their loan, so the seller cannot be paid while the bank loan is in arrears. Sellers sometimes resist this, and it is better agreed at heads of terms stage than argued over at completion.

Your own contribution

Lenders expect the buyer to put some money into the deal. Cash from an existing practice, retained profits or funds from investors all count. Our wider acquisition finance guide covers how contributions and senior debt fit together across sectors.

What a whole-firm purchase adds

When you buy a firm rather than a block of clients, the price is only one part of the money you need. You also take on:

People. Staff move with the business. In an asset purchase they transfer to you on their existing terms under the TUPE rules on business transfers, including their accrued holiday and length of service.
Commitments. The office lease, practice management and tax software licences, and any hire agreements for IT or phones.
Regulatory status. The firm's registration with its professional body, its anti-money laundering supervision and, if it has audit clients, its audit registration, which depends on who controls the firm.
Timing risk. Clients see a change of ownership, not a change of accountant, so retention is usually better than with a fee block, but the seller's personal relationships still matter.

If you are buying only the client relationships, our page on block of fees finance covers that simpler deal.

The cash gap after completion

Accountancy firms carry a lot of money in lock-up: time recorded but not billed, and bills issued but not paid. How that is handled on completion is where under-funded acquisitions come unstuck.

In an asset purchase you normally start with no work in progress and no debtors. Salaries for the transferred staff start on day one, but the first fees for their work arrive only once jobs are finished and billed. Complete in October and those staff spend the autumn preparing January self-assessment returns that will not become cash until February or March.

In a share purchase the lock-up comes with the company, but you pay for it in the price. A practice with slow billing is effectively selling you cash it has not collected. Moving clients onto monthly fee plans after completion can release some of that cash, but lenders will not assume it.

A revolving credit facility arranged alongside the acquisition loan is the usual answer. Lenders' treatment of unbilled time and unpaid fees is covered in depth on our fee and WIP funding page.

Illustration: the figures below are invented and rounded to show the mechanics, and are not a quote or offer.

A two-director firm buys a limited company practice with annual fees of £400,000 through a new holding company.
The agreed price is £360,000: £200,000 on completion and £160,000 over two years, adjusted if fees fall, and ranking behind the lender.
The completion payment is met by £60,000 of the buyers' own funds and a £140,000 term loan to the holding company.
The price assumes a normal level of work in progress and debtors stays in the company. A separate revolving facility covers the January peak.
The lender asks one question: once a salaried manager is doing the seller's work, is there enough profit left for both the bank and the seller to be paid on time, even if some fees are lost after the sale?

Risks and alternatives

Goodwill lending usually comes with personal guarantees from the buyers, so understand how much you are guaranteeing and for how long: our guide to personal guarantees sets out what to check. Watch for obligations stacking up in the same year: loan repayments, deferred instalments and integration costs can all fall due while clients are still deciding whether to stay.

Borrowing is not the only route. A merger with no cash changing hands, a staged purchase in which you buy part now and the rest later, or a larger share of the price deferred to the seller can all reduce the debt. Some sellers prefer equity-backed buyers, and our comparison of debt and equity funding sets out the difference. If the seller is a partner in your own firm rather than an outside practice, see our page on partner buyout finance instead.

More guides on funding a business purchase

Each of these guides covers one part of funding a purchase in more depth.

To see which lenders on our panel fund purchases like yours, start with Instant Quotes: tell us the amount and what it is for, and see your matches with no credit search.

Underwriting

What lenders test in an accountancy acquisition

Profit after replacing the seller

If the seller personally carried a heavy load of chargeable hours or all of the review work, the lender deducts the cost of someone doing it after they leave.

Which fees recur

Annual accounts, tax returns, payroll and monthly bookkeeping count for more than one-off advisory projects. Fees from research and development tax credit claims are often discounted because that work has become less predictable.

Relationship risk

How many of the largest clients deal only with the seller, how long the seller will stay to introduce you, and whether the sale agreement stops them soliciting clients afterwards.

Regulatory record

Recent practice assurance or monitoring outcomes, any disciplinary history, and approval of the new owners by the firm's AML supervisor. New owners and managers of an accountancy firm generally need that approval, and it can involve a criminal record check.

Integration capacity

Whether your team, software and premises can absorb the firm without service slipping in the first tax season.

Price against profit

A price expressed as a multiple of fees may look normal but be high against what the practice actually earns.

Presenting the deal as the transaction it is makes a difference. In one completed acquisition, we arranged a £137,500 facility for an established firm buying another accountancy business, with the agreed heads of terms and the acquisition rationale put in front of underwriting rather than a generic loan application.

Checklist

Agreed heads of terms, showing price, deferred payments and any retention adjustment
Two to three years of the target's filed accounts, plus its latest management figures
A client-by-client fee list with service lines, billing method and how long each client has been with the firm
Aged work in progress and debtor reports
A staff list with roles, salaries and notice periods
Your own firm's accounts and management figures, or your CV and a personal statement of assets and liabilities if this is your first practice
A forecast for the combined business, with a lower-retention case
A structure chart if a holding company will borrow, plus lease and PII details

Side by side

Compare your options

How the main business finance structures work. Lenders set their own terms, so treat this as a guide to the questions to ask.

Option	How you repay	Security	Often used for
Unsecured business loan	Fixed instalments, usually monthly	No charge over assets; a personal guarantee is usually required	Growth, stock, tax bills and cash flow
Secured business loan	Fixed instalments, often over a longer term	A charge over property or other assets	Larger sums, property and refinancing
Revolving credit facility	Interest on what you draw; repay and redraw	Varies by lender and case	Recurring or uneven cash flow gaps
Merchant cash advance	A share of future card takings	No charge over assets	Card-taking businesses with uneven months
Asset finance	Regular payments over the life of the asset	The asset being financed	Equipment, vehicles and machinery
Invoice finance	Settled as customers pay their invoices	Your unpaid invoices	Businesses waiting on customer payment

General information only. Every lender has its own criteria, and all finance is subject to status.

The legal route shapes the funding more than most buyers expect. Agree it with your solicitor and tax adviser before you ask lenders for terms, because it changes who borrows, what security is available and how much working capital you need.

Point	Buying the shares	Buying the trade and assets
What you get	The whole company, with its history, contracts and registrations	The goodwill, chosen client relationships and equipment
Past-work claims	Stay inside the company you now own, so warranties, indemnities and the company's PII policy matter	Stay with the seller, who normally arranges run-off indemnity cover
Work in progress and debtors	Come with the company and are priced through completion accounts or a locked-box mechanism	Usually excluded, so you fund the first months of work yourself
Who borrows	Often a new holding company, with a debenture and guarantee from the practice after completion	Your existing firm, secured on its own business
Seller's view	Often preferred, as a share sale may qualify for Business Asset Disposal Relief	Can mean two layers of tax if the seller's company sells the trade and then distributes the cash

Sellers often prefer a share sale, and that preference frequently decides the structure. Buyers then protect themselves with warranties, an indemnity for pre-completion claims and part of the price held back.

Business acquisition loans for accountancy practices

A business acquisition loan is a term loan used to pay for a business you are buying, repaid from the profits of the combined firm. For an accountancy practice, lenders size it on the recurring fee income and maintainable profit of the firm being bought, then look at how much the buyer is putting in and how much of the price the seller has agreed to defer.

Part of the funding	What it usually covers	What lenders look at
Senior acquisition loan	Most of the price paid at completion	Recurring fees, client retention and how comfortably profit covers the repayments
Buyer's own money	A share of the price and the transaction costs	Where it comes from and whether it is at risk alongside the lender
Deferred consideration	Part of the price paid to the seller over time	That it ranks behind the lender and is tied to fees retained
Working capital facility	Cash for the months after completion	The work in progress and debtor book you take on

Where the buyer is a company, the lender will usually take a debenture over it and over the practice it acquires. That charge must be registered at Companies House within 21 days, starting the day after it is created (GOV.UK, register a charge), and the buyer's solicitor normally handles it at completion.

To see how a price, your own contribution and a deferred payment turn into a loan and monthly repayments, try the loan to buy a business calculator. For buying a business outside the professions, see our acquisition finance hub, and our guide to goodwill finance explains how lenders treat goodwill as part of the purchase.

How we arrange acquisition funding

You share the heads of terms (or the deal as it stands), the target's figures and your own.
We test appetite with suitable lenders on our panel before you commit to a price, so you know what can be funded.
We compare offers on cost, structure, guarantees and conditions, including any requirement for deferred payments to rank behind the lender.
The lender carries out its own checks and makes the decision. Drawdown is then timed to legal completion.

Any broker fee is disclosed separately before you proceed. Our earlier guide to loans to buy an accountancy practice covers preparation from the buyer's side, and sellers may find our guide on how to sell an accountancy practice useful.

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FAQs

Questions clients ask

Can the practice I buy help repay the acquisition loan?

Yes, in a share purchase through a holding company that is the usual design. The practice pays dividends up to the holding company, which services the loan, so lenders look at the profits and distributable reserves of the practice itself. UK private companies can generally give security for the purchase of their own shares, which is why lenders often take a debenture and guarantee from the practice after completion. Take legal advice on the detail.

Do I need to be a qualified accountant to buy an accountancy firm?

Not to own a business, but it affects what the firm can call itself and what work it can do. Professional bodies set rules on who must control a firm that uses their designation or holds audit registration, such as ACCA's control and description requirements. Lenders also favour buyers with practice experience, so an unqualified buyer usually needs a qualified partner or senior manager in the deal.

What happens to the loan if clients leave after completion?

The loan is still repayable in full. A deferred payment that adjusts for retention reduces what you owe the seller, which is why lenders like it, but it does not change your bank repayments. Size the borrowing so it is affordable in a lower-retention case, not just the one in the seller's figures.

Can I buy a practice and its office in the same deal?

Yes. The building is often bought separately from the practice, sometimes by the buyers personally or by a pension scheme, with the practice paying rent. Secured borrowing against the premises can run over a longer term than the goodwill loan. See buying business premises for the options.

How long does finance to buy an accountancy practice take?

Finance to buy an accountancy practice typically takes several weeks to a few months, because the lender's decision depends on heads of terms, the seller's fee and retention data, due diligence, the sale agreement and the plan for transferring clients. Approval of new owners by the firm's AML supervisor can also affect timing. Secured lending adds valuation and legal work. See how long a business loan takes for typical timescales.

Which lenders fund accountancy practice acquisitions?

Accountancy acquisitions are funded by high street banks with professional services teams, challenger banks and specialist lenders that understand recurring compliance fees and goodwill. Some also lend under the Growth Guarantee Scheme. Appetite varies with deal size, the share of the price that is goodwill and how much is deferred to the seller, so we search the market for lenders that fit. You can check your matches first with Instant Quotes.

What is a business acquisition loan?

A business acquisition loan is a term loan used to buy a business, repaid from the profits of the combined firm. For an accountancy practice it is usually sized on the recurring fees and maintainable profit being acquired, alongside the buyer's own money and any deferred payments to the seller.

How much of the purchase price will a lender fund?

It depends on the profit the practice makes, how much of its fee income recurs, and how much the buyer and seller put in. Lenders want profit to cover the repayments comfortably, so a practice with strong recurring fees supports a larger share. Our guide to the deposit needed to buy a business explains how the buyer's contribution is judged.

Is goodwill enough security for a loan to buy an accountancy firm?

Goodwill is usually most of what you are paying for, and lenders who specialise in professional practices will lend against it, looking at fee income, client retention and the buyer's experience. They usually take a debenture over the buying company and often ask for personal guarantees as well. See our page on goodwill finance.

How do I work out the repayments on a loan to buy an accountancy practice?

Take the price, subtract your own money and any part the seller defers, and the balance is the loan. The loan to buy a business calculator turns that into monthly repayments and shows how they compare with the practice's profit. The figures are illustrative, and lenders set the actual terms.

Keep exploring

Related funding options

All guides