Professional practices

Insolvency practitioner finance for IP firms

How insolvency practices fund WIP between realisations, case-book purchases and growth in appointments, and what lenders check in an IP firm.

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In short

Supporting practice owners at every stage.

Insolvency practitioner finance funds the firm, not the estates it administers.

IP practices borrow because fees are drawn only once the fee basis is approved and assets are realised, so months of time costs build up as WIP while salaries, bonding and software are paid monthly. Revolving credit and unsecured term loans are the usual answer, with acquisition finance for practice or case-book purchases. Lenders focus on how recoverable that WIP is and on the licensed IPs behind it.

Finance across the lifecycle

Funding every stage of your practice

The funding question changes as a practice moves from its first day to its next owner. These are the points where it usually arises.

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About insolvency practitioner finance

Specialist knowledge. Better outcomes.

An insolvency practice can be busy, profitable on paper and short of cash at the same time.

The work is real, but the fees sit inside case estates until creditors or a committee approve them and the office-holder has realised enough to pay them. This page is for owners and finance partners of insolvency and restructuring firms, from single-IP practices to multi-office firms. Smart Funding Solutions is a broker, not a lender: we search our panel of 300+ lenders and arrange funding from £10,000 to £20 million. The page is part of our professional practice finance section.

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Funding options and their trade-offs

Revolving credit facility

A revolving credit facility matches the shape of insolvency income best: draw while WIP builds on a heavy case, repay when fees are drawn. It needs discipline, because a facility that is never cleared becomes permanent debt funding loss-making cases.

Unsecured term loan

An unsecured business loan over two to five years suits recruitment, an office move or a software change. Personal guarantees from partners or directors are usual.

Working capital loan

A working capital loan suits a firm that has permanently grown its case load and needs a larger cash buffer rather than a short-term bridge.

Acquisition finance

Buying a practice is buying people and cases. Acquisition finance is normally sized on the fee history of the cases transferring and their remaining realisations, often with part of the price deferred and tied to fees actually recovered. Our guide to deferred consideration explains how that works.

Fee-based WIP funding of the kind some law firms use is less common for IPs, because unapproved time costs are not yet a debt anyone owes the firm.

Why IP firms carry so much WIP

Fee recovery in insolvency follows rules that do not apply to other professions. The office-holder must have a fee basis approved, whether time costs, a percentage of realisations or a fixed fee, and can draw only from funds in the estate. That creates gaps a lender needs to understand:

Administrations and liquidations generate heavy time costs early, in securing assets, dealing with employees and investigating directors, while realisations such as property sales, book debt collections or claims against directors can take a year or more.
Creditors' voluntary liquidations are often funded by a pre-appointment fee paid by the directors, sometimes in instalments, which can leave the firm carrying the case before the money arrives.
Pre-appointment and advisory work on restructurings that never lead to an appointment may be partly or wholly written off.
IVA books pay through monthly debtor contributions over several years, steady but slow, and vulnerable when debtors miss payments or variations reduce contributions.

Against that, the costs are monthly and fixed: case managers and administrators, case management software, statutory advertising, and the enabling and specific bonds each appointment requires.

When practices look for funding

Rising appointment volumes: demand for insolvency work tends to rise when the wider economy struggles, and firms need to hire before the fees from new cases flow.
A large case: a single administration with significant time costs and a long realisation timetable.
Buying a practice or case book: acquiring a retiring IP's firm, or a portfolio of IVAs or liquidations moved to new office-holders by court order.
Partner changes: a new licensed IP buying in, or a founding partner retiring.
Tax and VAT: fees drawn in a cluster can create a VAT or corporation tax bill out of line with normal months.

Risks specific to insolvency work

The trap in insolvency practice borrowing is funding cases that will never pay. Before borrowing against WIP, review which cases realistically have the assets to meet the time recorded, and price new work on that basis. Litigation funding and after-the-event insurance can fund an estate's claim against directors or third parties, but that is case funding agreed by the office-holder and is separate from business finance for the firm; we arrange the latter only. Where a tax bill is the pinch, a Time to Pay arrangement may be cheaper than a loan.

Revolving credit facility: fund WIP until fees are drawn
Working capital loans: payroll and overheads between realisations
Unsecured business loans: growth and recruitment
PII premium finance: spread insurance costs
Practice acquisition finance: buy another IP firm
HMRC loans: spread VAT and corporation tax

Underwriting

What lenders check in an IP firm

WIP recoverability

how much WIP sits on cases with approved fee bases and identified assets, compared with cases where realisations are uncertain.

Write-off history

how much time has been written off historically, by case type.

Licensed IPs

how many licensed practitioners the firm has and how appointments are spread between them. Appointments attach to individuals, so a single-IP firm carries real key-person risk.

Regulatory record

standing with the firm's recognised professional body, monitoring visit outcomes and complaints.

Case concentration

reliance on one or two large administrations for most of the year's expected fees.

Clear separation of estate money

lenders only take comfort from the firm's own accounts. Funds held in case bank accounts belong to the estates and cannot support the firm's borrowing.

Underwriting

How lenders assess insolvency practices: fee approval, bonding and case flow

Insolvency work is paid out of the estates a practitioner administers, so lenders look at the rules that govern when and how fees reach the firm.

Fee approval by creditors

Fees on most appointments must be approved by creditors or a committee on a time cost, fixed or percentage basis before they can be drawn. Lenders count only fees with an approved basis and realisations in sight.

Bonding and authorisation

Each practitioner must be authorised by a recognised professional body and hold a security bond for every case. Lenders treat bonding and authorisation costs as fixed overheads; see GOV.UK on insolvency bonds.

Where new cases come from

Appointments come from banks, lenders, accountants, solicitors and directors. A firm relying on one introducer is exposed if that relationship ends, and lenders ask about the spread.

The economic cycle

Insolvency volumes rise when the economy weakens, and the official company insolvency statistics show the trend lenders watch.

Checklist

Documents you will need

Filed accounts and current management accounts for the firm
Firm bank statements for the last six months, excluding estate accounts
A WIP schedule by case, showing fee basis, approval status and expected realisations
Fee drawing and write-off history for the last two or three years
Details of licensed IPs, their licensing body and current appointment numbers
For an acquisition: heads of terms and the list of cases and office-holders transferring

How we arrange finance for IP firms

Review the case bookwe start with the WIP schedule, not the turnover figure.
Choose the structurerevolving, term or acquisition finance, or a mix.
Approach lenderswe go to lenders on our panel that understand regulated professional income.
Compare offerscost, limits, guarantees and covenants side by side.
Lender decisionthe lender decides. It is free to enquire; any broker fee is disclosed separately before you proceed.

FAQs

Questions clients ask

Can a single-IP practice borrow?

Yes, but lenders will look hard at what happens to appointments if the IP is unable to act. Having a succession arrangement with another licensed practitioner, and key-person insurance, makes a case stronger.

Can we borrow to buy an IVA book?

It is possible where the book has a record of steady contributions. Lenders look at contribution history, failure rates and remaining terms, and usually prefer part of the price paid on a deferred, performance-linked basis. See goodwill finance for how intangible purchases are funded.

Do accountancy firms with an insolvency department borrow differently?

Usually the insolvency team's WIP is assessed alongside the rest of the practice. Our accountancy practice loans page covers the wider firm.

Can insolvency practitioner finance cover PII and bonding costs?

Yes, professional indemnity premiums can be spread over the policy year with premium finance, and a working capital facility can help with bonding and other annual costs that fall before case fees are drawn. Lenders look at the practice's case pipeline and fee approvals. The GOV.UK guidance on insolvency bonds explains the bonding requirement, and our page on PII premium finance covers the premium side.

Can an insolvency practice borrow to pay its VAT or tax bill?

Yes, lenders can fund a VAT return, corporation tax or partners' self-assessment bills, with repayments spread monthly. This is useful for IP firms where fees billed and subject to VAT may not have been drawn from case estates yet. Lenders check the firm's accounts, fee approvals and the size of the liability. See our page on VAT loans for how tax funding works.

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