Bank Financing

Succession Lending’s underwriting process requires information from the purchasing/borrowing advisor and the selling advisor. Our quantitative and qualitative process evaluates several factors.

Character Assessment

The character of the borrower is an extremely important underwriting factor; as a result, the underwriting process will examine credit, civil, and criminal court records and U5 declarations.

Cash Flow Assessment

Commonly, financial advisory practices have very limited tangible assets to secure financing; consequently, banks focus on the revenue from the practice being acquired to collateralize the loan. More specifically, banks want to determine if you have the cash flow to support the monthly loan payment. In some cases, the cash flow from the acquiring advisor’s practice are aggregated to determine if sufficient cash flow exists.

Practice Assessment

Underwriters want to determine transition risk for the acquisition, succession, or merger.

Factors that impact attrition include:

  • Transition timeline for selling advisor
  • Client facing personnel retention from seller’s practice
  • Advisory versus commission based fees
  • Tenure of the acquiring advisor
  • Requisite personnel for acquiring advisor to service new clients
  • Age of retiring advisor
  • Average age of the clients in the seller’s practice
  • Average tenure of the clients in the seller’s practice
  • Beneficiary planning initiatives for the seller’s practice
  • Portfolio diversification

Validating Documentation

Underwriting requires documentation to validate the loan application. Documentation required includes:

  • 3 years' personal tax returns
  • 3 years' business tax returns
  • Personal financial statement
  • Revenue validation
  • AUM validation

Securing bank financing for financial advisory practices can be frustrating and time consuming. Succession Lending’s Loan Directors can help you navigate the process.

Your career goals require capital.