Billable hours aren't cash
A professional services firm sells time and expertise. The biggest cost is people, paid every fortnight. The income comes later, sometimes much later. Work in progress builds up on long matters or projects before it can be billed. Invoices go out on 14 or 30-day terms and get paid on 60 or 90. Law firms may wait on settlements or outcomes before fees are paid. Agencies wait on milestone sign-offs. Consultants wait on government or corporate payment cycles.
The bigger moments are harder still. Buying a book of clients or a retiring principal's practice. Buying out a partner. Moving offices with a fit-out and a bond. A big client going into administration and leaving a hole in debtors. An ATO debt that grew while the firm was investing in staff. These all need real money at a specific time.
Typical pressure points
- Work in progress and lock-up before fees are billed and paid
- Slow-paying corporate and government clients
- Partner and principal buy-outs and retirements
- Buying a client book or another practice
- Office relocations and fit-outs
- ATO debts, including PAYG and GST
Professional services scenarios
| Firm | Situation | Exit |
|---|---|---|
| Accounting practice | Buying a retiring accountant's client book with a set completion date | Bank refinance |
| Law firm | Large matter in progress, fees not payable until completion | Fees paid on completion |
| Marketing agency | Major client paying late, payroll due | Client invoices paid |
| Engineering consultancy | Government contract on a long payment cycle | Contract payments received |
| Architecture firm | Partner leaving, buy-out agreed | Refinance to a longer-term lender |
| IT consultancy | ATO debt after rapid hiring | Refinance or business cash flow |
| Recruitment firm | Contractor payroll weekly, clients paying monthly | Receivables collected |
Examples are illustrative only. Every loan is assessed on its own scenario.
Why the bank isn't always the answer
Professionals are often good bank customers, but a bank will still ask for years of financials, tax returns, an accountant's letter and debtor reports, then send it to credit. A bank refinance commonly takes up to three months or more, and you may not be approved for the amount you need. A partner buy-out with a fixed date, a firm with a recent ATO issue, or a principal who has been through a separation can all slow things down further.
Unsecured and cash flow lenders can be quicker, but the amounts are often smaller and the repayments frequent. If one has already declined you, see declined for an unsecured business loan.
How Equity Tap lends to firms
Most principals own a home or investment property. Equity Tap lends $50k to $5m for one to twelve months against that property, using a first mortgage, second mortgage or caveat. A second mortgage leaves your home loan exactly where it is, though the first lender's consent may be needed.
We don't need tax returns, BAS, profit and loss, an accountant's letter or bank statements. Yes, that includes accountants borrowing for their own practice. We don't order a valuation before approval. There's no credit check at initial assessment, and an ATO debt or past decline isn't automatically a problem.
Interest for up to the first six months can be prepaid or added to the loan, so there are no scheduled payments while the matter completes or the buy-out beds in. Interest is not waived, and the full cost is shown before you proceed. We'll make sure you understand the loan, the costs and the exit before anything is signed.
Exits for professional firms
- Payment of fees on completion of a matter or project
- Collection of outstanding debtors
- Bank refinance once a buy-out or acquisition is complete
- Sale of an investment property
- Sale of part of the practice or client book
What we need from a firm
ID, the security property and existing mortgage details, what the funds are for and evidence of the exit. For a buy-out, that might be the heads of agreement and a bank's indicative offer. For a slow-paying client, an aged debtors list or the invoice itself. You won't need to prepare financial statements or ask your accountant for a letter.
From first call to funds
Call or schedule a call at a time that suits your diary. Tell us the property, existing mortgage, purpose and exit. Conditional approval can often be given on the call, with a term sheet in about 30 minutes once we have the scenario. Eligible loans can settle in as little as 24 hours.
Broker note
Professional clients expect a quick, discreet process. If the bank is taking too long on a buy-out or acquisition, send it through the broker page. We can bridge the deal and you arrange the long-term refinance.
Also see medical and dental practices and buying a business fast. Apply online or call 1300 123 024.
Business-purpose lending only. Approval, timing and terms depend on the scenario.
Frequently asked questions
Can I borrow to buy out my business partner?
Can I borrow to buy a client book?
Do you need my firm's financials?
Our biggest client is paying late. Can you help?
Will my existing home loan be affected?
Do you lend to sole practitioners?
Is the process discreet?
Brokers: send the scenario through the Equity Tap broker channel and you will deal with the same lending team.