From around £10,000 to £500,000+Larger facilities available in suitable cases
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In short
Law firm acquisitions are usually funded with a term loan repaid from the enlarged firm’s profits, alongside the buyer’s own cash and deferred payments to the seller linked to fee retention. Lenders focus on how much of the target’s income will survive the change of ownership, the risk profile of its work types, the cash tied up in lock-up, and whether SRA approvals and indemnity arrangements are settled before completion.
This page is for principals, partners and LLP members buying another solicitors’ practice, whether that is a retiring sole practitioner’s high street firm, a niche team from a larger firm, or a competitor in the next town. Smart Funding Solutions is a broker, not a lender: we approach lenders on our panel of 300+ that understand how law firms are valued and bill, arranging funding from around £10,000 to £500,000+, with larger facilities available in suitable cases. For the wider picture of borrowing across a firm’s life, see our solicitor practice loans hub.
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The main route for most deals is an amortising loan to the acquiring firm, usually over three to seven years, sized so that the combined firm can repay it from profit after partner drawings. Smaller purchases are often arranged as unsecured business loans with personal guarantees; larger ones may carry a debenture over the acquiring firm. Some lenders offer term loans under the British Business Bank’s Growth Guarantee Scheme, which can help where security is thin; the guarantee protects the lender, and the borrower remains fully liable.
02
Revolving facility for inherited lock-up
If you buy the WIP but not the debtors, or take on a litigation team with long-running matters, a revolving credit facility can fund salaries and disbursements until those matters bill. Our sibling page on WIP and disbursement funding covers this in more depth.
03
Property-backed borrowing
Where the acquiring partners or the firm own commercial property, secured business loans can support a larger advance or a longer term. The trade-off is plain: the property is at risk if repayments are missed.
What you are actually buying
A law firm has almost no hard assets. The furniture is worth little, the client account money belongs to clients and never forms part of the price, and the building is often leased. What a buyer pays for is a combination of four things, and each one is financed differently.
Goodwill: the expectation that clients, referrers and repeat instructions will stay with the practice after the seller steps back. This is the part lenders scrutinise hardest because it has no resale value if the clients leave.
Work in progress: unbilled time on live matters. In conveyancing it converts to cash quickly on completion; in contentious, personal injury or clinical negligence work it can sit for a year or more.
Debtors: bills issued but not paid. Sellers often keep these and collect them themselves, which reduces the price but leaves the buyer with a cash gap in the first months.
Stored files and archived wills and deeds: these carry storage costs and regulatory duties rather than value, and a buyer who takes them on needs to budget for that.
Separating these items in the heads of terms makes the funding request clearer: goodwill suits a term loan, WIP and debtors suit working capital, and the deferred element suits the seller.
SRA approvals and indemnity cover in the timetable
Lenders will not release funds into a deal that could leave the firm unable to practise, so regulatory steps sit on the critical path. New owners and managers of an authorised firm generally need SRA approval, and a firm must keep its compliance officers in place; the SRA sets out the process in its guidance on approval of role holders. Where one firm takes over another’s practice, the SRA also expects notice of the succession, described on its notice of succession page.
Indemnity cover is the other critical point. Depending on how the deal is structured, the acquiring firm may be treated as a successor practice, so its insurer picks up claims arising from the seller’s past work, or the selling firm closes and buys run-off cover. The answer affects the price, the acquiring firm’s next premium and the conditions a lender will attach to its offer. For funding the premium itself, see PII funding for law firms.
Illustration: a high street practice purchase
Illustration only, with hypothetical round numbers. A two-partner firm agrees to buy a retiring sole practitioner’s private client and conveyancing practice for £300,000 of goodwill. The heads of terms provide for £180,000 on completion and £120,000 over two years, reduced proportionately if retained fees fall below an agreed level. The buyers put in £40,000 of their own cash and seek a £140,000 term loan. They also buy the WIP at a discount but leave the debtors with the seller, so they ask for a modest revolving facility to cover the first quarter’s salaries. The lender models the combined firm’s profits with a haircut on the acquired fees, adds the deferred payments to the debt service, and checks that the partners’ drawings still leave headroom.
Risks to weigh before you borrow
The largest risk is client attrition. Private clients often follow a trusted individual rather than a firm name, and referrers may reconsider their panel after a change of ownership. Retention-linked deferred consideration shares that risk with the seller; paying everything upfront does not.
Personal guarantees are standard, so each acquiring partner is exposed beyond their capital in the firm; read our note on personal guarantees before signing. Integration costs, such as case management migration, file review and TUPE obligations, are easy to underestimate. Buying a firm with a poor claims record can also raise your own PII premium at the next renewal. Sometimes the better answer is not to buy the whole firm: recruiting a team or buying a defined block of fees, as described in our block of fees finance guide, carries less inherited risk.
Underwriting
How lenders assess a law firm target
A lender reviewing a practice purchase is asking one question: once the seller has gone, will enough fee income remain to pay the partners, the staff, the insurer and the loan? The evidence it looks for is specific to legal services.
01
Work type mix
residential conveyancing and wills and probate carry high claims exposure and move with the housing market; commercial, private client and employment work tend to be steadier. Legal aid work brings reliable volumes but thin margins and contract risk.
02
Where instructions come from
a firm fed by one estate agent, one referral panel or one institutional client is more fragile than one with a broad local client base.
03
Fee earner dependency
if the retiring principal personally bills a large share of fees, lenders expect a handover plan and often a consultancy period.
04
Lock-up
combined WIP and debtor days show how long each pound of fee income takes to reach the office account. Long lock-up means more working capital is needed after completion.
05
Claims and complaints history
the target’s PII claims record, open complaints and any regulatory history affect both the insurer’s appetite and the lender’s.
06
The acquiring firm’s own track record
lenders take comfort from a buyer who has integrated a practice before, or who already practises the same work types.
Checklist
Documents lenders will ask for
Signed or near-final heads of terms, and the draft sale agreement when available
Two to three years’ accounts for both firms, plus current management accounts
The target’s fee income by work type, fee earner and top clients or referrers
Aged WIP and debtor reports for both firms
Office account bank statements for the acquiring firm (client account balances are not relevant to affordability)
Integration plan: staff transferring under TUPE, premises, systems and supervision
Status of SRA applications and the indemnity position, including any successor practice or run-off arrangements
Partnership, members’ or shareholders’ agreement for the acquiring firm and personal financial statements for guarantors
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.
Buying another practice isn’t just another loan application.
General information only. Every lender has its own criteria, and all finance is subject to status.
How law firm purchases are usually structured
Few solicitor practice purchases are paid in full on day one. The common pattern is an initial payment on completion, with the balance paid over one to three years and adjusted for the fees actually retained. The table sets out the usual building blocks.
Source
Typical role in the deal
Trade-off
Buyer’s own cash
A contribution towards the initial payment, showing lenders the buyers are committed
Reduces the reserves available for integration costs and the PII renewal
Senior term loan
Funds most of the completion payment, repaid from the combined firm’s profits
Personal guarantees from the acquiring partners or directors are usual
Deferred consideration
Balance paid in instalments, often reduced if fees fall below an agreed level
Keeps the seller involved, but repayments to the lender and the seller must both be affordable
Working capital facility
Covers the gap while inherited WIP is billed and collected
A separate cost; drawn balances need to reduce as matters conclude
If the seller retains a consultancy role, the value of that arrangement should be weighed against its cost. Our guide to vendor finance and deferred consideration explains how lenders treat payments still owed to a seller.
How we arrange the funding
We review the heads of terms, both firms’ figures and your integration plan, and identify where the numbers need explaining.
We present the deal as an acquisition, setting out what is being bought and how the enlarged firm services the debt.
We approach lenders on our panel with appetite for professional practice purchases and compare their terms, conditions and guarantee requirements with you.
The lender underwrites and decides; we then work with your solicitors on conditions precedent such as SRA approvals and indemnity evidence.
We have arranged acquisition funding for a professional practice before: our accountancy practice acquisition case study describes a £137,500 facility built around the agreed heads of terms. It is free to enquire; any broker fee is disclosed separately before you proceed. Buyers comparing sectors can also read our general acquisition finance guide.
What our clients say
I’d like to say a big thank you to Simon and the team for successfully assisting with the sourcing and placing of our most recent funding. Simon was able to secure a lend when others appeared to have run out of appetite to place business or source viable options. I would highly recommend Simon should you need to raise capital or finance for your business needs.
Solicitors’ practiceManagement teamGoogle review
FAQs
Questions clients ask
How much deposit do I need to buy a law firm?
There is no fixed figure. Lenders want the buyers to have a meaningful stake, and the size depends on the quality of the target’s income, how much of the price is deferred and whether there is security. A larger deferred element tied to fee retention usually reduces the cash the buyers need to find on completion.
Can I use the target firm’s client account money to fund the purchase?
No. Client money belongs to clients and is protected by the SRA Accounts Rules. Lenders assess affordability using office account figures only, and any structure that relied on client funds would be a serious regulatory breach.
Is it easier to fund a share purchase or an asset purchase of a law firm?
Lenders can fund either. Buying the shares of a limited company or the membership of an LLP brings the entity’s history with it, which is why due diligence on claims and complaints matters. An asset purchase of the practice lets the buyer choose what to take, but the seller then deals with closure, run-off cover and archived files. The funding case follows the structure your advisers recommend.
Can a sole practitioner borrow to buy another practice?
Yes, subject to affordability and supervision arrangements for the enlarged practice. Borrowing of £25,000 or less by sole traders and small partnerships can be regulated consumer credit, which brings additional protections. For partners contributing capital to fund a deal personally, see our page on partner capital loans for solicitors.
How long does law firm acquisition finance take to arrange?
Law firm acquisition finance usually runs alongside due diligence and completes on the same timetable as the purchase, rather than being a quick separate step. Lenders need the target's accounts, a fee analysis and the proposed structure, and they will not release funds until SRA approvals and indemnity cover are settled. Starting the funding conversation early stops the loan becoming the item that delays completion. Our guide to business acquisition due diligence sets out what to prepare.
Buying a whole accountancy firm is usually funded with a term loan sized on the combined practice's maintainable profit, the…
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