Negotiating Non-Compete Terms in a Practice Sale: What Every Seller Should Know
Thinking about selling your practice? Before you sign, ask yourself: could that non-compete clause cost you your next opportunity,...
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For many advisors looking to grow their practice, acquisitions are an attractive path. The challenge, however, is identifying the best way of funding a financial advisor practice acquisition in a way that lets you move quickly on an opportunity without depleting resources. Each acquisition is unique, and it is largely up to the parties involved to determine what they are willing to invest/accept. However, there are typically three ways to finance an acquisition.
One option is to finance the purchase yourself. The benefits are that you don’t have any liabilities moving forward and you remain in total control of the business. The downside is it limits the size of business you can purchase and ties up much needed capital.
For many years, seller financing was a popular option, if not the only option in some cases. It allowed buyers to participate in larger deals than they could with self-financing, while giving sellers a way to ease into an exit. However, few sellers are willing to carry a note, and if they do it is usually at five-year terms. Shorter term equals higher monthly payments, which can significantly impact cash flow.
For many years, lenders shied away from providing loans for financial advisor acquisitions. This was largely due to the fact that they didn’t know how to value and structure acquisitions for this industry. However, in recent years many lenders have entered the field and are providing a variety of loan options to buyers. More importantly, they are offering loans that have terms up to 10 years with interest rates and fees that allow advisors to preserve cash flow while expanding purchasing power.
Due to the increase popularity and accessibility of lender financing, we reached out to a number of our lending partners to develop a guide that highlights the benefits of loans for acquisitions and key things to prepare yourself for the loan process.
A 35-year veteran of the industry, Whitbeck’s experience, industry knowledge, and track record make him a powerhouse ally for financial advisors and industry leaders. With certified third-party business valuations, legal and lending support partners, and a proven acquisition process, Whitbeck and his team of experts have helped hundreds of financial advisors build, manage, protect, and successfully transition their practice.
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