Why Do Lenders Ask More Questions During an Accounting Practice Acquisition?
Updated: Oct 24
Further lender questions usually seek a clearer understanding of the proposed borrowing without, by themselves, signalling either approval or refusal.
When an accounting practice acquisition reaches formal assessment, another email asking for documents can feel like a step backwards. You may have already supplied financial statements, explained the purchase and spent weeks gathering information from the vendor.
Yet a submission is the beginning of the lender’s assessment, rather than its conclusion. The practical question is what remains unclear, why it matters and which evidence can help answer it. For Australian buyers, that conversation needs to stay connected to the purchase timetable as well as the credit decision.
Your accounting practice acquisition: the short answer
A lender may need to reconcile figures, update information or understand an assumption.
Questions can concern the practice, buyer, forecast, funding structure or proposed security.
A useful response connects a clear explanation to relevant supporting evidence.
Further requests do not establish approval, refusal or an extension of contractual deadlines.
Material changes should reach your acquisition finance adviser promptly, even while earlier questions remain outstanding.
Why does the first submission leave questions unanswered?
An application draws information from different people and different points in time. The vendor’s accounts may describe the last financial year, the sale agreement may reflect recent negotiations and your forecast may assume a future operating model.
The lender needs to understand how those pieces fit together.
A finance assessment considers financial performance and repayment capacity. Depending on the application, projections, management accounts or transaction documents may also be needed. The information required for your acquisition depends on the proposed facility and circumstances.
A question may therefore be quite narrow: which entity earned the income, whether a deposit has already been paid or why two reports show different totals. Sometimes the answer raises a further issue. That can be frustrating, but an accurate explanation is more useful than treating every follow-up as an obstacle to overcome.
When the figures tell different stories
One common area for clarification is the relationship between the practice’s financial records and the figures used to describe the sale.
Revenue in an Information Memorandum might cover a different period from a billing report. An adjusted earnings figure might include changes that are not visible in the statutory accounts.
As the buyer, you should understand the reconciliation before passing it on. For example, an explanation that revenue is lower because billing moved into the following month becomes more meaningful when it identifies the period affected and includes subsequent invoices or management information. The lender can then consider the explanation alongside the records.
If the difference remains unresolved, say so.
A confident narrative built around an unverified figure can leave the application further from the transaction’s actual position. Your acquisition finance adviser needs to distinguish an accounting timing difference from a change that may affect earnings or the funding request.
Current trading and earnings adjustments need context
Historical accounts cannot show every development since year-end.
A significant client departure, a staff resignation or slower collections may affect the picture presented earlier. A request for current trading information can help clarify whether the historical performance still provides a sensible starting point.
Questions about normalised EBITDA can also reach beyond the arithmetic.
If the vendor’s remuneration has been added back, who will perform the work after settlement? You may take on some responsibilities personally, while other functions require staff or paid transition support.
A useful response explains both the adjustment and its effect under your ownership. Evidence that an expense will cease does not automatically show that the underlying function disappears.
Where you expect savings or higher fees, distinguish established changes from improvements still to be achieved.
The lender may be asking about continuity
An accounting practice’s income depends on people continuing to deliver work and clients continuing to engage them. A question about a major client relationship may be an attempt to understand concentration, continuity or the assumptions supporting future income.
Your review of owner dependence can help explain those issues. If the vendor personally manages significant relationships, the application should describe the proposed introductions, ongoing availability and responsibilities during handover. These arrangements can address parts of the transition, without guaranteeing client retention.
You should agree an appropriate information-sharing process with your advisers and the vendor. Although an aggregated or de-identified schedule may answer the initial question, identifiable client information needs suitable authority and handling arrangements.
A finance request should not become a reason to circulate unrestricted client files.
Why are there questions about the buyer and forecast?
A successful practice under its current owner may operate differently under yours. The lender may seek a clearer account of your experience, management capacity, existing commitments or the roles of related entities.
An established firm also needs to explain how the acquisition sits alongside its current debt and workload.
business.gov.au’s loan-application guidance identifies financial information and forecasts as part of preparation. Applied to an acquisition, a forecast should allow the reader to follow the assumptions behind receipts, expenses and repayments. The supporting explanation matters alongside the spreadsheet.
For instance, forecast growth may rely on fee increases that have not yet been discussed with clients. Rather than presenting those increases as settled income, you can explain their timing, basis and possible retention consequences.
If the lender asks what happens without that growth, a separately identified scenario gives the discussion a clearer foundation.
Funding and security questions can change the picture
A lender may also need to establish where your contribution comes from, when it becomes available and how settlement expenditure will be met. Cash intended for the deposit, professional fees and working capital cannot all be counted towards the same payment.
Similarly, vendor finance or deferred consideration introduces future obligations that need to sit within the funding explanation. Questions about proposed security, ownership or guarantors should be answered from the relevant documents.
Your solicitor can help explain legal responsibilities, because providing information does not mean that you should accept obligations without understanding them.
How can you respond clearly?
The most helpful response usually makes the lender’s next reading easier. Your acquisition finance adviser can coordinate the request and help identify what evidence is relevant, while you and the appropriate advisers confirm the underlying facts. A short response schedule can keep the discussion organised:
Restate the question and provide a direct answer.
Identify the supporting document, date, period and relevant section.
Explain any difference from information supplied previously.
Keep unresolved matters visible and name who is obtaining the answer.
Show consequential changes to the forecast, funding request or transaction terms.
For an illustrative example, a lender asks why forecast staff costs are lower than the vendor’s accounts. The answer might separate an agreed departure from an assumed efficiency saving, then show replacement costs and the revised forecast. Although that provides a basis for assessment, it does not determine the eventual credit outcome.
Keep the purchase timetable in view
Responding promptly can help the assessment progress, but no response guarantees a particular turnaround. Tell your acquisition finance adviser if information depends on the vendor or another adviser.
Your solicitor should explain the finance condition, notice requirements and deadlines, because a further information request does not necessarily extend them.
Frequently asked questions
Does another lender question mean the application is failing?
No. The request may concern clarification or a material concern. Its meaning depends on the question and the wider assessment, so ask your acquisition finance adviser what remains unresolved.
Should I send every document I have?
Provide relevant, current evidence through the agreed process. A large unsorted bundle can obscure the answer and create unnecessary disclosure of confidential information.
What if the vendor cannot provide the requested evidence?
Explain what is unavailable and why. Your acquisition finance adviser can discuss whether other evidence may assist, although you should not assume that an alternative will be acceptable to the lender.
Should I disclose a change while questions are outstanding?
Yes. Material changes to earnings, price, staffing, structure or settlement should be discussed promptly so the application remains current.
Does answering all questions mean funds are ready?
No. Submission and clarification are separate from approval. Any approval may have conditions and documentation requirements before funds become available for settlement.
Make the evidence easier to understand
Further questions are best approached as specific information needs. Clear explanations, current records and visible uncertainties help the lender assess the acquisition you intend to complete. Keep your acquisition finance adviser informed, and keep the finance process aligned with your contractual obligations.
Considering Buying an Accounting Practice?
Discuss lender questions and the evidence needed to keep your accounting-practice acquisition application current.
General information only. This article does not constitute financial, credit, legal, tax, accounting, compliance or valuation advice. Finance is subject to lender approval, eligibility criteria, terms, fees and conditions. Consider obtaining independent professional advice for your circumstances before acting.
