The job of every accountant is to manage other people’s money—but sometimes you might have to worry about yours. When you need some extra capital, business loans for accounting firms can help you explore new opportunities, boost marketing, get the right technology, predicaments, periodic changes, and more.

For most accountants and accounting firms, the start of the year can be stressful. And your business may not be prepared to deal with a lot of customers willing to get their taxes done. At this point, you need to ask yourself: does your business positioned to offer the same quality services during the busy tax season? Do you have an adequate qualified workforce? Are you equipped with the latest technology? We’re pretty sure your head might be spinning right now while thinking about these questions, and the last thing we want is for you to panic.

Managing an accounting firm involves a diverse skill set than accounting itself. The best part of running an accounting firm is that you very well know your financials and business situation, and the same can be used as an advantage while applying for a business loan. Here is a detailed guide on what you need to know when applying for business loans and how your knowledge will be helpful.

A business loan for an accounting firm is a vital financing tool to help your business grow and succeed irrespective of your expansion plans or preparation for the cyclical crux of tax time.

Types of Business Loans for Accounting Firms

Here is an overview of different business loan types that suit your business needs based on your own eligibility and capital needs.

  1. Small Business Administration (SBA) Loans

Small Business Administration loans are considered the best business loans for almost every kind of business. They offer the best repayment terms (up to 25 years), loan amounts (up to $5.5 million), and affordable interest rates (criteria-based). SBA loans are backed by the government, making it the safest lending option, especially for lenders. SBA doesn’t lend money directly to borrowers—they provide funding based on their network of lenders who review your loan application. By providing a kind of safety net to the lenders, in case borrowers default on the loan, they allow lenders to offer favorable terms to the borrowers.

There are some different types of SBA loans including SBA 7(a) loan, SBA 504/CDC loan, SBA Caplines, SBA Export loans, SBA Microloan, and SBA Disaster Loan. The most suited SBA loans for accounting forms are the SBA 7(a) loan and SBA 504/CDC loan. The SBA 7(a) loan is a general working capital loan that is offered as either as a lump-sum term loan or a business line of credit. The SBA 504/CDC loan is used to finance large fixed assets like real estate.

Qualifying for SBA loans is tough; they only go to the most qualified borrowers. A credit score of 620 to 680 is required with proof of solid revenue numbers and established business history. If you think you’re eligible, apply for an SBA loan right away. The only downside of these loans is the detailed documentation with a few weeks to a month’s approval time.

  1. Business Term Loans

If you’re unable to qualify for SBA loans or don’t have time to gather the detailed documentation and processing, consider applying for business term loans as an alternative. A business loan term loan is like a “traditional” business loan where you get a lump sum amount of money deposited into your business bank account. Business term loans provide quick access of capital to accounting firms who want to purchase new equipment or technology, finance a marketing campaign, or hire expert staff.

Generally, these term loans have terms up to five years with an affordable interest rate that you have to pay on the entire borrowed amount. The repayments are weekly or monthly, based on the term and structure of the loan. You can have quick access to capital usually in a matter of days, making term loans an ideal financing option for accounting firms that require fast capital.

  1. Business Lines of Credit

Accounting firms usually have seasonal periods, meaning they will have different capital needs during different times of the year. Most accounting firms can get through with the money they make in the peak season, but it can be hard for them in the off or slow season. If you’re facing the slow season, applying for a business line of credit can help you make it through the hard times. With a business credit line, you can access the needed capital, and only pay interest on the capital you use—not the whole loan amount. Once you get approval from a lender for a certain credit line, you’re able to “draw” against that line as much money as you want to manage your expenses. This business loan option is extremely helpful for an accounting firm with cash flow issues, especially when you need cash to pay for expenses during the tax period.

The paperwork requirement for business lines of credit is minimal and less intensive, and good credit borrowers often get quick approval. With a credit line, you not only manage your seasonal transitions, but it also assists you all year round.

  1. Business Credit Cards

When the above-mentioned business loans are not suited to your needs, getting 0% intro APR business credit cards can help. A business credit card is a valuable business loan option for solo accountants. A business credit card, with some added discounts from professional organizations, you can easily sail through the rough financial waters.

It is recommended to secure a 0% introductory APR business credit cards, so you can spend on your card without any interest for a predetermined period of longer than a year. While spending on your cards, you’ll get rewards and benefits just like other rewards cards, and help build your business credit. But remember, when your introductory period is over, you’ll be charged at prime Market Rate, so make sure you review the terms before signing the dotted line.

How to Get Business Loans for Accounting Firms?

Now you know the best business loan options for your accounting firm, let’s discuss how you can get your hands on them.

  • Choose the Loan Type

The first step is to choose the business loan type based on your needs. You can choose the type by analyzing your business and personal finances. While deciding the loan type, assess what’s imperative to you. Whether it’s the quick cash or affordable rates? Or, it should be flexible in terms of payment? Once you understand these factors, you’ll be able to secure the ideal business loan type for your accounting firm.

  • Analyze Your Financials

Before making a loan application, understanding your financials is vital for business loan approval. If you don’t know your numbers well, it can hinder your application for the right loan products. As an accountant, you’ll likely know your financials, being it a head start in understanding how your financial profile will help you get quick access to business loans for accountants—or avert you from securing funding.

Start with analyzing your revenue, time in business, and credit score. The better these numbers are, the more financing options you’ll have for different business loans, and, most likely, the more affordable your loan will be. Understanding your financials is also important in order to assess your capital needs since you don’t want to take on a loan that you eventually can’t afford to repay or become dependent on the lender.

  • Organize Your Loan Documentation

The most important part of getting quick approval for a business loan application is collecting and organizing the important paperwork lenders require.

There is a minimal paperwork requirement for most business loans for accountants. You can also ask your lender for the list of paperwork requirements for the loan type you’re applying for. For most business loans for accounting firms, prepare the following documents:

  • Personal identification
  • Two years of personal and business tax returns
  • Three months of business bank statements
  • Financial Statements
  • Business licenses and permits
  • Disclosure of other debt
  • Ownership and affiliations
  • Legal contracts and agreements

The Bottom Line

While analyzing other people’s finances, it might feel strange to do the same for yourself. Your profession also gives you an edge when as you look at the right business loan for your accounting firm because you have a profound understanding of how financials work, and, finally, how it can influence your business while taking out a business loan.

Another benefit of your line of work is that you have a stronger network of professionals equipped with massive financial knowledge. If applying for a business loan for your accounting firm feels like a daunting task, get help from your network and industry connections. Every accounting business has distinct needs, so it’s vital that you determine what areas require improvements in your business. Good luck!

Small Business Financing News │ Merchant Advisors | blog
Business Loans for Accounting Firms - Finance Your Accounting Practice
Business Loans for Accounting Firms - Finance Your Accounting Practice
Looking for funding to fund your small business? The road ahead is full of twists and turns because it does require a lot of time and research to locate the best funding program that suits your business. Due to theRead more
Whether your accounting business is getting prepared for a seasonal transition or for expansion, a business loan for accounting firm can make a difference!
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Merchant Advisors