Due to our extensive industry experience, the strength of our banking relationships, and our corporate structure (such as our virtual workflow system), we are able to obtain and offer the lowest rates in the industry. Our banking partners price investment advisor and RIA loans with similar risk to traditionalC&I loans, despite the lack of hard assets or tangible collateral.
1. Discovery Call (typically 30-60 minutes)
This is used to learn more about your firm and financing needs, as well as providing an overview of our firm and answer any questions you may have.
2. Upload Documents
Upload documents (see Document Checklist) to our secure Sharefile data vault.
3. Obtain Term Sheet (1-2 weeks)
We will conduct preliminary underwriting and work to obtain a term sheet with the best terms and a banking partner that is the best fit for your long-term growth strategy. The majority of underwriting is completed during this step so that term sheets can be issued with a high degree of certainty that final terms will in fact match the term sheet.
4. Underwriting/Loan Closing (4-8 weeks)
The bank will complete final formal underwriting and prepare loan documents to be ready for funding. Additional documentation may be requested during this step such as legal entity documents, purchase agreements, and life insurance documents.
Loans can be approved and closed within 60 days of receiving a completed file. This may be expedited as necessary.
We generally will use conventional financing as conventional loans tend to have better terms, more flexibility, and a significantly less onerous process. We are able to access SBA financing options as an alternative if needed.
Depending on the need and use of the funds, we are often able to provide working capital lines of credit.
A seller guarantee is not necessarily required for a full buyout. In the event of a partial buyout where the seller remains a 20% or more owner, there is generally a requirement for the seller to be a co-guarantor. Each situation will be evaluated on a case-by-case basis.
In general, loans will be structured with a 10-year amortization with fixed interest rates over a period of 5, 7, or 10 years. Variable/floating rates are also available if desired. For acquisition loans, various flexible structures are available to accommodate different disbursement schedules to the seller. For example, if there is a certain percentage of the purchase price due at closing and a different percentage due in the future, (i.e. 12 months for closing), we could structure a loan as a non-revolving line of credit or delayed draw loan. This ensures that interest is not due on funds until the funds are actually paid to the seller. Other options are available on a case-by-case basis.
There are typically no prepayment penalties when making additional principal payments out of cash flow. There may be prepayment penalties if refinancing with an outside financial institution.
There are two fees that occur during this process, the first being a term sheet fee. This fee is due upon your acceptance of the terms offered and is based on a sliding scale from $1,250-5,000. Then there is a 2% origination fee due at closing which can be rolled into the loan (not paid out of pocket).
We will generally finance from 80-100% of the purchase price based on the specific situation. When 100% financing is not available, a seller note component is often sufficient resulting in no requirement for cash equity.
Assuming the seller carries a loan with the buyer, this portion of the loan is called a seller note which is subordinated to the bank loan. Under a subordination agreement, scheduled payments can be made to the seller, provided the bank loan is not in default.
If you have an existing acquisition loan with a bank, we will likely need to refinance that loan depending on the collateral. As the low-cost provider with flexible terms, a refinance will often help improve monthly cash flow.
A depository relationship is usually required when engaging in a transaction with our banking partners. These banking partners are seeking strong relationships where they can assist not only in the current your current funding needs, but also future opportunities. If you greatly desire to maintain your existing banking relationship, often there are alternative solutions that will satisfy this requirement.
Yes, an assignment of life insurance is typically required for the guarantors equal to the loan balance. This is standard amongst most providers in this space.
Banks primarily underwrite the vibrance of the firm based on their cash flow. They will also utilize industry standard revenue and earnings multiples in estimating the value of a firm. A 3 rdparty valuation is typically not required on loans under $1 million. For loans over $1 million, we are often still able to waive the valuation requirement. When needed, we can recommend several partners that will assist in determining an accurate valuation for the practice to be purchased.
We get this question frequently and are happy to discuss our recommendations while referring you to the proper resources. See our “How to Buy a Practice” document for more information.
After looking into several options to secure financing for a practice acquisition we were referred to Advisor Financing. They provided seamless support with our financing needs. All arund great experience. We will use them again!
I had checked with other sources, but after we reached out to Advisor Financing, that's the direction we decided to go. I was joining a financial planning practice and they found us a financing solution that best fit our needs.
I worked with Advisor Financing to obtain some working capital for my business. The process went smoothly. They understand our industry and the metrics to obtain an accurate valuation.
