Guides / Deal structure

How much financing do you need to buy an advisor book?

In the realized deals we can source, down payments ran from 25% to 100% of the purchase price with a median of 90%. Plan for far more cash than the classic 25% to 50% rule of thumb suggests, and understand what a lender will and will not count as your income.

Key takeaways

• Across the 11 realized deals with a disclosed down payment, cash at close ranged from 25% to 100% of price, median 90%, mean 84.5%.
• Canadian practitioner guidance still says 25% to 50% down with the balance on a vendor take back note, so the gap between guidance and observed deals is where buyers get caught short.
• Third-party financing raises cash at close: US brokered deals averaged 73.8% down with a lender versus 48.5% without one in 2024.
• Lenders underwrite revenue net of your grid payout, not gross production, and one US specialty lender's stated ceiling is about 2x combined recurring revenue.
• One Canadian buyer financed her acquisition through Manulife Bank; another used dealer financing over seven years with payments deducted from commissions.
• Cash at close is largely a competitive variable: in brokered US processes offers arrived at or above ask with 80% or more down, and several closed at 100% cash.

Plan on paying substantially more cash than you expect. Across the realized transactions we can source with a disclosed down payment, cash at close ranged from 25% to 100% of the purchase price, with a median of 90% and a mean of 84.5%. The low end is a Canadian buyer who paid 25% up front and the remaining 75% over 12 monthly instalments on a 20-household book, per Globe Advisor. The high end is multiple deals that closed at 100% cash, including one Oregon practice sold with no contingencies, per Succession Resource Group.

That median deserves a warning label. Most of the deals with disclosed terms are brokered, and a brokered process with a lender behind the buyer produces a high cash-at-close number by design. The Canadian practitioner guidance points the other way: a down payment of 25% to 50%, with the balance paid out of earnings through a vendor take back note, per George Hartman in Investment Executive. Both descriptions are accurate about different corners of the market, and the gap between them is where unprepared buyers lose books.

The practical reading: assume you need to be able to put 50% down to be credible, and be capable of going higher if a second bidder shows up. Nothing on this page is a financing offer or a rate quote. Rates, terms, covenants and eligibility come from your own lender, your dealer or your MGA.

Where a Canadian advisor actually gets the money

The Canadian acquisition-finance channel is thin and heavily gated by the dealer or MGA. The documented options break into four groups.

A chartered bank, sometimes through a relationship your practice already has. Twyla Hardham financed her acquisition of a roughly 320-client book through Manulife Bank, per Globe Advisor. That is one named, realized Canadian financing, which is more than most sources can offer, and it is worth noting that she paid 3.0x recurring revenue and structured a 10% holdback for 18 months around it.

Dealer or MGA loan programs. One Canadian buyer used dealer financing repayable over seven years, with the dealer deducting the loan payments directly from his commission, per Globe Advisor. On the insurance side, Financial Horizons operates a book of business purchase loan program under which it guarantees loans to Scotiabank, available to Elite advisors, per Financial Horizons. Firm loan periods of five to seven years are the reported norm, per Investment Executive.

Specialty and commercial lenders. A Canadian advisory-finance specialist describes the landscape this way: CWB Maxium lends above $1M, banks generally want more than $1M of EBITDA, BDC covers deals below that threshold, specialty lenders charge 30% to 100% higher rates, deals take 12 to 18 months, and dealer financing may become repayable in full if the advisor changes platforms, per Acquatio. That last point is a live risk for anyone who thinks they might move dealers inside the loan term.

The seller. Commission-sharing arrangements running up to seven years are used in place of financing, and full cash settlement happens only when the buyer is well capitalised, per Julia Haggerty of Advisor Finance in Investment Executive. In the US, 56.8% of one large sample of closed deals used seller financing, with an average note amortization of 5.94 years and an average note interest rate of 4.9%, per SRG. Treat that as a labelled US cross-check.

Vendor take back notes and the seller's tax position

A vendor take back is not free money. It is the seller lending you part of their own sale proceeds, and whether they can afford to do that is a tax question before it is a commercial one. Canadian sellers push for share sales in order to access the lifetime capital gains exemption, while buyers prefer asset sales so that liabilities stay behind, per Globe Advisor, which reports exactly that disagreement being resolved in the seller's favour in one realized Canadian deal.

The size of the effect is not marginal. A captive program paying 2x gross revenue as ordinary income can net the seller less than a third of what a 4x share sale qualifying for the LCGE delivers, per Wealth Professional. A seller who has modelled that will resist a structure that spreads proceeds across years as ordinary income, and may prefer more cash at close even at a lower headline price. Whether the practice is incorporated changes what is being sold at all: where it is not, the thing being sold is the goodwill associated with the client list, which is an asset, per Advisor.ca and Jamie Golombek. This is tax and legal territory: your accountant and the seller's accountant both need to be in the room, and nothing here substitutes for that.

What a lender is actually underwriting

Not your gross production. The number that matters is revenue net of your grid payout, because that is the cash that reaches your corporation and services the loan. The Canadian range published for pricing itself is stated on the same basis, 2x to 3.5x of recurring revenue net of grid, per Advisor Finance in Investment Executive. If you present a lender with gross trailing revenue and a 3x price, you are describing a loan that is roughly 25% larger relative to real cash flow than it appears.

Expect a ceiling expressed against recurring revenue. A US specialty lender in this niche has stated a lendable limit of around 2x combined recurring revenue, per Kitces. Against a price of 3x, that implies the remaining third of the price comes from your own equity, a seller note, or both. Expect a lender to look at the same drivers a buyer looks at: recurring versus non-recurring mix, client concentration, the age profile of the households, whether the seller is staying, and whether the book is moving between platforms. Cross-channel transfers are documented as harder in Canada, where one price negotiation was made more complex because the transaction was from an IIROC seller to an MFDA buyer, per the Investment Executive cover story.

A worked model

The following is an illustration, not a quote. Assume a book producing C$500,000 of gross recurring revenue, an 80% grid so that C$400,000 reaches the buyer, an operating cost load of 40% of that leaving C$240,000 of cash flow before debt service, and a purchase price of 2.5x net revenue, or C$1,000,000. The interest rate of 7.5% amortized over seven years is an illustrative assumption chosen for arithmetic, not a rate available to any reader. Your own lender sets your rate, your term and your amortization.

Two things fall out of the arithmetic. First, at 25% down the deal still covers its debt service comfortably on paper, which is precisely why the classic guidance exists and why lightly capitalised buyers like the structure. Second, the coverage ratio is only as good as the retention assumption underneath it: rerun the 25% row at 80% retention and cash flow before debt service falls to C$192,000, taking coverage to 1.4x, and at 70% retention it is C$168,000 and 1.2x. The financed deal is the one that fails first when clients leave.

Note also that a large down payment does not mean a small loan. It usually means the loan sits at the bank rather than with the seller, and the buyer carries the full amount from day one instead of paying it out of the book's cash flow as it arrives. In the 2024 US sample, average cash down was 73.8% where third-party financing was involved and 48.5% where there was no lender, per SRG. Financing is what buys the seller their cash, and it is what wins competitive processes.

Cash at close is a competitive variable

The reason observed down payments are so high is that the attractive books draw crowds, and cash at close is the cleanest way for a buyer to differentiate. In one brokered US sale, 87 interested parties produced three formal offers, all with 80% or more down, and the deal closed at 3.82x recurring revenue with a 90% non-refundable cash down payment, per SRG. In another, 53 qualified buyers produced four offers at or above ask and the winner paid 100% cash with no contingencies, per SRG. A third closed at 100% cash on a US$109M AUM RIA, per SRG, and the forced sale of a deceased advisor's practice also settled at 100% cash, per SRG.

Those are US deals, run by a firm that is paid to create that competition, so read the levels as an upper bound rather than as what a private Canadian negotiation looks like. The mechanism still travels. Canadian buyers have paid 100% upfront to win a book of engaged, responsive households, per Globe Advisor, and one Greater Toronto Area book drew around 30 bids, per Investment Executive. Where there are 30 bids, the buyer offering 25% down and a seven-year note is not in the conversation.

The risk of over-levering an untested book

The danger in this asset class is not the rate. It is buying a revenue stream that has never been tested by a change of advisor and then borrowing against the seller's version of its stability. Contracted retention targets in one sample of 176 closed deals averaged 88.00% of annual gross revenue measured one year after closing, per SRG. Even in a well-executed acquisition, only 90% to 95% of clients remain after one year, per Kitces.

Canadian mechanics make the first year harder, not easier. Transfers require written client authorization, taking roughly 10 business days, client information cannot be disclosed without prior written client consent, and an approved person cannot act for the new dealer until registered, per CIRO. Every one of those steps is an opportunity for a household to decide not to come along. Market timing adds another layer: one deal was repriced from 3.14x to 2.82x revenue purely because of the February and March 2020 drawdown between offer and close, per SRG.

Three defences are available and none of them is a lower rate. Structure a retention holdback so that part of the price adjusts if the book does not arrive, as Canadian buyers routinely do with 90% upfront and a 10% holdback tested after one or two years, per Globe Advisor. Buy a transition, not just a list, since seller involvement of 12 months or more is consistently associated with better outcomes. And size the loan so it survives your own pessimistic retention case rather than the seller's base case.

Before you talk to a lender, get the price range right, because the loan is a function of it. Run the book through our free valuation estimate, check your own criteria against what buyers are looking for on the buyer criteria page, and read the worked structure in buying a $50M AUM book for how price, holdback and transition fit together in one deal. Rates, covenants and approval are between you and your lender, and nothing on this page is a financing offer.

Common questions

How much cash do I need to buy a book of business?

More than the rule of thumb suggests. Canadian practitioner guidance describes 25% to 50% down with the balance financed by the seller, but in the realized deals with a disclosed down payment the median was 90% of price and several closed at 100% cash. If you are competing against other buyers for an attractive book, plan on a large majority of the price being payable at or near closing.

Will a bank lend against a book of business?

Some will, and the channel is narrow in Canada. Reported options include dealer or MGA-guaranteed loan programs, a chartered bank in one documented Canadian acquisition, and specialty lenders that price well above bank rates. Lenders generally size the loan against recurring revenue net of your grid payout and will want to see the retention history of the book, not just its gross production. Rates and terms come from your own lender.

What is a vendor take back note?

It is seller financing: the seller accepts part of the purchase price as a promissory note repaid out of the book's future cash flow, often over several years. It reduces the cash you need at close and signals seller confidence, but it competes with a bank loan for the same cash flow and it interacts with the seller's tax position, so the seller's accountant will have a view on how much of the price can sit in a note.

How do I know if I am over-levering the acquisition?

Model the debt service against revenue net of grid, then rerun it on a retention assumption well below what the seller projects. Contracted retention targets in one large US closed-deal sample averaged 88% of annual gross revenue one year after closing, and Canadian transfers require written client authorization, so attrition is a real and front-loaded risk. If the deal only works at full retention, it is over-levered.