How do you finance buying a consulting firm?

The credit is the client list

A consulting firm sells the time and judgement of its people. Its balance sheet is usually receivables, some unbilled work, laptops and a lease. If the loan goes bad, there is no fleet or building to sell; the lender's recovery depends on the firm still earning. So a lender financing a consulting acquisition is really lending against goodwill, and goodwill in a consulting firm is the likelihood that clients who hired the firm last year hire it again next year, under an owner they may never have met.

That is why the P&L is only the starting point. A lender wants revenue by client for at least three years, to see which clients recur, which were one large project, and whether the firm replaces those it loses. Then the harder question: for each large client, who at the firm holds the relationship? If the answer is always the seller, the buyer is purchasing a list of people loyal to someone who is leaving.

Before a lender prices the loan, it will ask who holds each large client relationship. Know the answer, client by client, before the letter of intent is signed.

Which revenue a lender counts

Consulting revenue comes in shapes lenders treat very differently, so two firms with the same earnings can support very different loans.

Concentration is the other half. A firm that earns a large share of its revenue from one or two clients is only as safe as those relationships. Lenders do not have a fixed cut-off; they judge it against the client's history with the firm and whether the contract survives the change of ownership. Our page on customer concentration in an acquisition covers how lenders size around it, and concentration and debt capacity covers the conventional side.

What actually transfers to the buyer

In an asset purchase, the buyer's company acquires the firm's contracts, name, work product and systems. Several of those do not move on their own, and lenders ask about each before closing.

• Client contracts. Many consulting agreements forbid assignment without the client's written consent, and some let the client terminate on a change of control even in a stock purchase. For the largest ones, lenders may want the consent in hand. See change-of-control consents and asset versus stock purchase.
• The consultants. Senior staff can walk across the street with clients. Lenders ask for a roster with tenure and pay, and whether key people have signed non-solicitation agreements. Retention bonuses for them sometimes go into the use of proceeds.
• The seller's non-compete. It does not make clients stay, but lenders routinely require one in a consulting purchase, on terms enforceable in the state, because without it the seller can take the clients across town.
• Credentials and contract status. If a license held by the seller is what qualifies the firm for its work, someone must hold it after closing. Set-aside government contracts can be affected when the firm changes hands or joins a larger owner.

The seller's exit is the hardest part

In most businesses, the seller's transition is a few months of introductions. In a consulting firm it can be the entire deal. Clients hired the seller; the buyer needs time to be introduced, to deliver work, and to become the person the client calls.

SBA sets firm limits on this. In a complete change of ownership, the seller may not stay on as an owner, officer or employee; the seller may consult for up to 12 months. Under SOP 50 10 8.1, from 1 October 2026, that consulting period extends to up to 24 months. For a buyer who needs the seller to hand over client relationships one by one, the longer window matters. See SBA's seller transition rule.

If the seller wants to stay longer, or keep a stake, the deal becomes a partial change of ownership, which SBA treats differently, or moves to a conventional lender. Either way, lenders read the transition plan closely: which clients the seller will introduce, in what order, and how the buyer's background fits the work. See buyer industry experience; a partner or senior manager who is staying goes a long way toward answering it.

Retention pricing and the SBA earnout ban

Consulting sellers and buyers often want the price tied to how much revenue stays: a portion paid later, based on client retention. That is an earnout, and SBA prohibits an earnout to the seller in a change of ownership it finances. Under an SBA loan, the price must be fixed at closing.

Buyers handle retention risk in three ways instead:

• A lower fixed price, reflecting how much of the revenue is tied to the seller.
• A larger seller note. A seller who is owed money after closing has a reason to make the transition work. A note on full standby for the life of the SBA loan can supply up to half of the required equity injection; a note that pays currently is allowed but counts in debt service. See seller notes and SBA standby and how much seller financing.
• A conventional lender, which may allow an earnout subject to its own terms. See earnouts and acquisition debt and earnout versus seller note.

How the loan is sized

The lender rebuilds earnings from the tax returns, adds back the seller's pay and costs that were personal or one-off (see add-backs), and then deducts what it will cost to replace the seller's work. That last step is where consulting files diverge. If the seller billed a large share of the firm's hours, the buyer must either do that work or hire someone who can, and the lender deducts a market salary for it.

SBA's minimum debt service coverage is 1.15x, and 1.0x globally once the owners' personal finances are included. From 1 October 2026 a change of ownership must show 1.25x on historical results. Conventional banks commonly look for at least 1.25x. Our page on the buyer's salary in coverage explains why the replacement salary is not optional.

SBA or conventional

SBA 7(a) fits most owner-operator purchases. It goes up to $5 million, goodwill amortizes over up to 10 years, and the buyer's equity injection must be at least 10% of total project costs. Because nearly all of the price is goodwill, the amount financed less appraised real estate and equipment will usually exceed $250,000, so SBA requires an independent business valuation, and the loan for the purchase cannot exceed it. Every owner of 20% or more guarantees the loan, and lenders often take a lien on the buyer's home where there is equity in it; see personal residence collateral.

Conventional senior debt fits larger firms with several partners, a broad client base and clean monthly reporting, or a buyer adding a firm to one it already owns. Senior cash-flow lenders to lower-middle-market companies commonly lend 2x to 3.5x EBITDA; a consulting firm with heavy concentration or a founder-held client book sits at the careful end of that range, if it qualifies at all. See add-on acquisitions and SBA 7(a) versus a conventional acquisition loan.

Working capital deserves attention either way. Clients pay consultants in arrears, often on long terms, and a buyer who takes the firm without its receivables funds payroll for weeks before the first client pays. Receivables can be bought with the firm or funded as working capital in the loan; see working capital at close. A firm with a broad base of creditworthy clients may also support a receivables line: asset-based lenders typically advance 80% to 90% of eligible receivables, excluding those more than 90 days past invoice.

The file a lender needs

Transparent's SBA acquisition checklist, with the consulting-specific items lenders ask for:

• Business tax returns, 2–3 years, and the filing extension if the latest year isn't filed
• P&L and balance sheet with the latest full year of figures (never an older year), and a year-to-date P&L through last month-end
• Debt schedule, with copies of any notes being paid off
• Personal tax returns, 2–3 years, and a personal financial statement for each buyer owning 20% or more
• The letter of intent
• Revenue by client for each of the last three years, with the firm member who serves each
• The ten largest client contracts or engagement letters, with their assignment and change-of-control terms
• Receivables aging and unbilled work in progress
• Staff roster with role, tenure, pay and billable hours; non-solicitation agreements for key people
• The seller's transition plan and the draft non-compete
• The buyer's resume (supports Form 1919) and a use-of-proceeds narrative

With those in hand, Transparent builds the full lender package — financing model, lender presentation, blind teaser and underwriting memo — in a day; by hand, it takes at least a week. The model shows revenue by client, the replacement cost of the seller's work and the transition plan, so a lender sees the concentration question answered rather than discovering it. It goes to lenders in our book whose appetite fits: 278 write SBA 7(a) and 504 and 1,148 write term and private credit. See the package, how we underwrite, and our SBA data page for management consulting for SBA's lending record in this industry.