You’ve allowed us to help your clients grow their portfolios.
Now let us help you grow yours.
Our exclusive Advisor Acquisition program is an innovative lending program that can help advisors like you grow your businesses. You’ve depended on us to help your clients with lending solutions; now you can depend on us for the lending solutions you need that will help you grow your practice and expand your business.
ADVISOR ACQUISITION AT A GLANCE
- A convenient source of funds for:
- Business Expansion
- Book Purchase
- Fixed Loan Term of 5-7 years
- Interest-only and fully amortizing financing options available
- Aggressive, competitive interest rate
- Flexible loan amounts ($1,000,000 minimum)
- Administrative Expertise
GENERAL FACTS ABOUT THE ADVISOR ACQUISITION MARKET
- Presently there are 40 sellers to every 1 buyer.
- This means that having a reliable financing source such as The Bancorp at the ready has never been more important.
- 48% of advisors who make an acquisition grow more rapidly in the years following the acquisition than they had previously.
- Average down payment is 36%.
- Average multiple paid for non-recurring gross revenue is1.08(x).
- Average multiple paid for recurring gross revenue is 2.35(x).
- Seller’s book should be valued at 2.00-2.20(x) gross annual revenue.
Traditionally, lenders have shied away from financing the purchase of a financial practice; the practice’s value is in its cash flow and in the goodwill of its clients, not the more tangible collateral used for other types of business loans. But as the following case history shows, when the proper due diligence is completed and approval is given, The Bancorp will be your best and most trusted source for advisor acquisition financing.
OUR ADVISOR ACQUISITION PROGRAM IN ACTION
Client need: Book Purchase
Forty-year old Advisor Smith has been building a successful book of business for 15 years and now manages approximately $100 million, a combination of fee-based accounts and insurance products. Still young and focused on growing his practice, Smith has been actively looking to purchase a book of business from another advisor.
Advisor Jones is 70 years and has been serving his clients for over 40 years. He has grown his practice to $200 million in assets under management but is now looking to make a smooth transition out of the business. After a series of meetings with Smith, Jones becomes comfortable in transitioning the loyal clients that comprise his book of business to Smith. After due diligence by an advisory valuation firm produced a formal appraisal, the two advisors agree to a purchase price of $3 million and draft a purchase contract.
THE BANCORP ADVISOR AQUISITION SOLUTION
Advisor Smith contacts the Institutional Banking group at The Bancorp to discuss financing. He would like to provide the minimum down payment of 10% and finance the remaining $2.7 million. After documentation from both advisors is submitted, a full financial analysis is performed by The Bancorp that includes:
- Review of the purchase contract and a valuation report by FP Transitions (an advisory valuation firm based in Portland, Oregon).
- Full financial analysis of Advisor Smith’s historical and projected cash flows.
- Full financial analysis of Advisor Jones’s historical cash flow.
- Evaluation of Smith’s personal financial statement.
- Source of funds for 10% down payment from Smith.
- Credit report check for Smith.
- OFAC and UCC checks for both parties.
Once the loan is approved and Smith accepts the terms, a deposit of roughly 1% is submitted to cover expenses associated with legal fees for loan documentation, additional pre-lien searches, SBA underwriting, etc.
The Institutional Banking group at The Bancorp Bank then officially finances the Advisor Acquisition loan and pays Advisor Jones. The process of moving client assets from Advisor Jones to Smith begins and Smith starts integrating the accounts into his existing book.
(Disclaimer): The story presented represents a hypothetical situation based on The Bancorp’s experience with advisors and their clients and possible Advisor Acquisition solutions. It is intended to illustrate different potential challenges and is not meant to guarantee that a client’s needs or objectives will be met.
THE BANCORP ADVISOR ACQUISITION PROGRAM REQUIREMENTS
- Minimum 10% of purchase price from acquiring firm.
- Personal guarantees will be required of all individuals with ownership interest exceeding 10%.
- The underlying strength of guarantors, in addition to cash flow, will be fundamental in credit analysis.
- Executed Letter of Intent, The Bancorp/Advisor Lending Agreement and Guaranty.
- The engagement of a recognized valuation firm is key to making a formal appraisal, determining the purchase price and predictability of cash flows. Cash flow analysis is the key document in the underwriting process.
- Reasonable diversification of client concentration.
For more information about applying for Advisor Acquisition Financing, please contact a Business Development Officer from The Bancorp:
409 Silverside Road, Suite 105
Wilmington, DE 19809
Banking Services Provided by The Bancorp Bank. Member FDIC. An Equal Housing Lender.