One Thing You Should Do Before Structuring An Acquisition Deal

It’s always a good idea to do your homework before making a big purchase or entering into an agreement. It’s especially true when buying another financial advisory practice. Financing options for advisor acquisitions have improved significantly over the last several years. However, financing can also be an issue if you don’t take the right steps before you sign an agreement with the seller. That’s why it’s critical to speak to a lender before you structure your acquisition deal.

Too often advisors rush to firm up the deal and structure it without knowing what lenders will approve. Certain deal terms can conflict with lending rules and regulations. The absence of certain clauses and language can also hinder your ability to secure financing. The negotiation and deal making process is already hard enough, so it’s in your best interest to not burn the goodwill you have established by having to go back to the seller after an agreement has been reached and ask for major changes so you can qualify for financing.

Instead, it’s best to consult with a lender as soon as you begin the acquisition process. Find a lender who understands and specializes in the financial advisor space and who is experienced in structuring acquisitions loans. Often, they can advise you on whether or not the deal structure will qualify for financing and key protections to include to ensure that you can not only service the loan but will also reap the intended benefits of the acquisition. Many lenders serve as consultants and can advise you even before you have a deal, as well as help you evaluate opportunities and the potential impact of financing a specific deal on your business cash flow.

It’s one extra step in the acquisition process, but it’s one worth taking. Especially if you plan on making multiple acquisitions over time. An experienced lender can help you look at the specific deal as well as help you plan ahead for future growth. The right lender will work with you to build a long-term business relationship and will help you identify opportunities and identify any red flags or concerns that could negatively impact your business. So, make sure you do your homework and find an experienced lender who can advise you on your financing options before you start an acquisition. It will save you time, hardship, and may even just save the deal. Get a free consultation and explore your acquisition loan options now.