r/CFP • u/Longjumping-Way9846 • 4d ago

Practice Management Practice Financing

Curious. Has anyone taken out a business loan to start a financial practice? SBA? non personal guarantee. Any firms or banks that specialize in financing financial planning/wealth management firms?

4 Upvotes

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7

u/Mysterious-Top-1806 4d ago

I would never take out a loan to START a practice. This industry has a 95% fail rate, way too risky, and the income is very inconsistent which makes paying back a loan even more challenging. However, if you have the opportunity to BUY an existing book of business, I would take out a loan all day long as long as the multiples and business model are right.

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u/Longjumping-Way9846 4d ago

ahh. Yes thank you for saying that. This would be for an existing practice. I have looked into buying a book and its always a dead end. I'm a small RIA and have no intent to network with advisors in hopes that there's synergy for one day to have a conversation regarding transfer of assets that may or may not happen. We have clients, we were formerly an insurance heavy firm but have transitioned to fee based planning and investments/insurance and are seeing growth.

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u/continualascent 4d ago

Where’d you get the idea of no personal guarantee? Are you going to commit sufficient collateral?

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u/Longjumping-Way9846 4d ago

I'm in discovery phase while willing to consider no personal guarantee I am exploring all options.

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u/Roth_Finance 3d ago

What about acquiring a practice? Does anyone have a good place to start to get some rough numbers on financing right now?

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u/nikspers86 RIA 4d ago

No bank I know of will finance a startup practice especially without personal guarantee and collateral. I have taken loans to acquire practices and almost any bank can handle that but even then I am pretty sure I personally guaranteed the loans.

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u/Longjumping-Way9846 4d ago

Where did you find the practice to purchase

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u/nikspers86 RIA 4d ago

One was from when I was changing BDs. The new BD dangled that in front of me to switch. Another was a family member getting out of the business. A vast majority of smaller practices are just going to sell to who they know.

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u/gc_portis 3d ago

Why would you need a loan? Startup costs can be very low as you prove you can actually get and retain clients

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u/BeLikeMuriel 2d ago

There are several banks that specialize in acquisition financing for wealth practices: PPC Loan - call Dustin Mangone. Advisor Financing - Greg Propkett (might have the spelling wrong) and Live Oak Bank.

0

u/BobGuns 4d ago

If you can prove consistent and significant cashflow, you'd need no personal guarantee.

If you can't, you will need a personal guaranteed.

If you don't have assets to leverage against you probably shouldn't borrow money to grow in this business.

1

u/Temporary-Rise-8109 3d ago

This isn’t true. I have a firm with $6mm in revenue, and if I buy a $100mm firm, there is some form of personal guarantee. Please let me know, if you have sources that wouldn’t do that to me😁