What Your Lender Actually Sees When They Look at Your Book
When advisors start thinking about buying a book of business, most of the conversation happens around one number: the multiple. But according to Tom de Larzac, who has spent two decades in cash-flow lending with Care Lending, the number that actually decides whether a deal closes is a different one entirely.
"The financing capacity isn't always necessarily the same as the value or the purchase price," de Larzac told advisors on FindBob's Summer Series webinar, "because we're building in a bit of a buffer."
That distinction, between what a book is worth and what a lender will actually finance, is the single most useful thing to understand before your first real conversation about an acquisition. Get it right and you know almost immediately whether an opportunity fits your capacity. Get it wrong and you risk spending weeks on a deal that was never going to close, for you or for the seller on the other side of the table.
Cash flow and commissions are not the same number
De Larzac's first checkpoint is one that's easy to skip past: "commissions and cash flows are not the same thing." What a target book brings in on paper isn't what a lender underwrites against. Once you layer in the operating expenses you'll actually carry, staff, office space, whatever overhead the seller did or didn't have, the cash flow that supports debt can look meaningfully different from the top-line commission number.
If you already run an existing practice, you likely absorb some of that overhead already, which works in your favor. If this is your first acquisition, budget for it before you get attached to a price.
The financeable number isn't the same as the value
Care Lending doesn't lend right up to what a book is worth. De Larzac described underwriting to a cushion, wanting to see comfortably more cash flow than the annual debt payment requires. That margin is deliberate. It exists so a slower client transition, a soft quarter, or a rough market doesn't put your ability to service the debt at risk.
He was equally clear that most well-structured deals sit inside a normal market range, and that where the security is there, a lender can often finance the full purchase price. When a price runs richer than the cash flow comfortably supports, the deal isn't automatically dead. It just opens a conversation about where the extra support comes from.
The point to carry into your first call isn't a specific ratio or multiple. It's that the amount you can finance and the amount a book is worth are two different figures, and that a lender deliberately leaves room between them.
Financing has its own timeline, separate from the deal timeline
The other takeaway worth planning around: financing doesn't move at the speed of enthusiasm. De Larzac estimated roughly six months on average from an initial conversation to closing, and suggested budgeting two to three months specifically for the financing side once a lender is engaged. Rushed timelines, thin AUM history, and ownership structures that turn out to be more complicated than described at the outset are the most common causes of delay he sees. None of that is exciting, but all of it is avoidable if your documentation and structure are sorted before you're deep into a negotiation.
Two practical habits he flagged: have more than one year of AUM and commission history ready to go, and get the actual legal entities involved in the transaction confirmed early, not after the purchase and sale agreement is drafted. More than one deal has stalled at the eleventh hour because the buying or selling entity turned out to be different from what everyone assumed.
Where this leaves you
None of this is meant to talk anyone out of a good opportunity. It's meant to help you size one accurately before you spend weeks on it. Before your first real conversation about a book, know your existing cash flow, know roughly what multiple range the deal sits in, and know how much runway you'll need to get financing in place.
If you want a clearer read on where your own numbers land before that conversation starts, check out the valuation tool on your home office’s private instance its a reasonable place to begin. It won't replace a lender's underwriting or a CBV’s appraisal, but it gives you a real baseline to bring into that first call, so the opportunities you chase are the ones that were always going to work.