Professional services funding: accountants, lawyers, agencies and consultants

For an accountancy practice, a law firm, an engineering consultancy or a creative agency, the product is time. Staff are paid every fortnight, but fees only arrive after the work is done, billed and finally paid by the client. In between sits a pool of work in progress and unpaid invoices that can easily equal a couple of months of revenue. Funding for professional firms mostly addresses that gap, along with the bigger moments in a firm’s life.

Why professional firms are viewed well by lenders

Lenders generally like professional services. Client relationships tend to be long, fees recur, overheads are predictable and there’s usually little stock or heavy equipment at risk. A firm with a solid client base and good collections is often a straightforward approval. The questions usually focus on how quickly clients pay and how dependent the firm is on a handful of them.

Common reasons firms borrow

• Working capital. Covering salaries and overheads while large jobs are completed and billed.
• Office fit-outs. Moving to bigger premises or refurbishing an existing office.
• Technology. New practice management systems, hardware and security.
• Buying a practice or a book of clients. Growing by acquisition is common in accountancy and financial planning.
• Partner exits. Funding the payout to a retiring or departing partner. Our guide on buying out a business partner covers this.
• Tax timing. Smoothing the cash impact of income tax and PAYG instalments.

Which facility fits

Line of credit. Ideal for firms whose cash dips while large matters run, then refills when fees are paid. See business lines of credit.

Term loan. Suits one-off spends such as a fit-out or acquisition, with fixed repayments over a set term. Smaller amounts may be unsecured.

Invoice finance. Works for firms billing larger corporate or government clients on long payment terms. See invoice finance.

Property-secured lending. For bigger acquisitions or buyouts, property security can extend the term and the amount.

What lenders look at

Expect questions about fee income over the last year or two, how concentrated the client base is, average debtor days, staff costs as a share of fees, and existing debts. For acquisitions, the lender will want to understand the client list being bought, how many clients are expected to stay, and the transition plan.

Improving cash flow before you borrow

The cheapest money is the cash already owed to you. Billing more frequently, setting clear payment terms, offering easy payment options and following up promptly on overdue invoices can all shorten debtor days. business.gov.au publishes practical guidance on payment terms. Lower debtor days also make the firm look stronger to any lender.

Fixed fees, retainers and borrowing power

Firms that have moved clients onto monthly retainers or fixed-fee packages often find lenders more comfortable with them. Predictable monthly income reads well in bank statements and makes serviceability easier to show. If your firm is part-way through that shift, point it out, along with the number of clients on retainer and the monthly value. It’s a strong signal of stability that an assessor may otherwise miss among the noise of project billing.

Planning for a practice purchase

Buying a practice is often the biggest financial decision a professional will make. Lenders want to see the target’s fee history over several years, client retention after previous changes in ownership, and how the purchase price relates to recurring fees. Many deals include a retention clause, where part of the price depends on how many clients stay. Factor that into the loan structure so you’re not borrowing for clients who may not transfer.

Seasonal peaks in professional work

Many professional firms have a busy season. Accountants are flat out around tax time and the end of the financial year, while agencies and consultants often see projects bunch up before Christmas or the end of a client’s budget cycle. The busy months generate the most work in progress and the biggest wage bills, but the fees arrive later. A line of credit sized to the peak, and cleared as the fees come in, keeps the firm from leaning on the ATO or stretching suppliers. Lenders find this pattern easy to understand when the firm’s bank statements show it happening year after year.

Talk to us about your firm

Tell us about your firm, your fee base and what you need through our short enquiry form. There’s no credit check to enquire, your file stays with one team, and a real person will tell you which structure suits your firm’s cash cycle. Tell us about your firm.