Finance to buy into a professional practice, structured properly

Yes. Lending to fund a professional practice partnership share is an established product that specialist lenders understand well. The loan is assessed against the practice's recurring fee income and your own financial profile rather than against tangible assets, because in most professional practices the main asset is the client relationship book. The right lender for this deal is not a high-street bank and not a generic business loan provider: it is a lender who regularly funds professional practice transactions and understands how goodwill is valued in your sector.

This is one of the most important structuring questions on a buy-in, and the answer affects both the rate and the security requirements. A loan in your name as an individual (secured against your future drawings and personal assets) is simpler to arrange but typically carries a higher rate. A loan to the practice (treated as a working capital injection, with the buy-in price then paid to the exiting partner) involves the whole partnership in the agreement and may carry a lower rate but requires more complex documentation. We work through both structures with you and present whichever lenders are most competitive for each.

For most professional practice buy-ins, the security is a combination of a personal guarantee from the buying-in partner and an assignment of rights over their practice drawings. Physical property is not always required, particularly for established practices with strong recurring revenues and the buying-in partner having a demonstrable income from the practice going forward. Some lenders will also take a charge over the practice's fee debtors. We will always tell you what security a lender is seeking before you go any further with them.

Lenders typically advance 50 to 70 per cent of the evidenced goodwill value, and their assessment of that value is based on recurring fee income rather than a single-year snapshot. They look for three years of consistent billing history, a client retention rate above 80 to 85 per cent, and no single client representing more than 15 to 20 per cent of total revenue. A practice that meets those criteria will generally be valued more generously than one with lumpy or concentrated revenues, regardless of the headline profit figure.

For straightforward buy-ins with a well-evidenced practice and an agreed purchase price, decisions can come back within one to two weeks. More complex structures involving deferred consideration or partial earn-outs typically take three to four weeks. The key is engaging Sorbus Finance early in the negotiation process, before heads of terms are finalised, so the finance structure is confirmed by the time the partnership agreement is ready to sign.