Securing Advisor Business Loans For M&A, Succession Planning And More

Experts From SkyView Partners, Live Oak Bank And LaSalle St. Explain How Advisors Obtain Favorable Terms, Expedite The Application Process And Use Capital To Grow

By Chris Latham, - The time may be ripe for financial advisors to drastically improve their chances of securing favorable business loans. Many advisors who seek to grow through M&A, establish succession planning or transition ownership arrangements, purchase office buildings or refinance existing business debt may need to obtain a loan in order to achieve their strategic goals.

Although options abound – banks, loan brokers, broker-dealers, custodians, private equity and more – choosing the proper funding source and obtaining the best loan terms often remain challenging for advisors. Experts say this is due to both relatively few loan providers having a strong specialization in the wealth management space, and general inexperience among advisors seeking first-time loans adding to their confusion with the process.

Accessing The Partner Bank Model

“The number one thing is to get your house in order to prepare for the commercial underwriting process, which we have attempted to streamline as much as possible,” says Scott Wetzel, CEO and Co-Founder of SkyView Partners, which launched in 2017.

The Wayzata, Minnesota-based firm works with a network of partner banks to help advisors complete the application process and secure business loans. For instance, SkyView provides templates for documents that advisors may be missing, so they can quickly populate information for partner banks including The Bancorp Bank, Coastal State Bank, Pathward Bank, Academy Bank and First Internet Bank. Wetzel encourages advisors to organize and categorize files such as their personal financial statement and tax documents, before seeking loans.

“The good news for all financial advisors out there who may ever seek financing for M&A is that financial advisors have been exceptionally well behaved borrowers. We have yet to have a charge-off, and we have yet to have even a payment delinquency, since inception,” Wetzel said, noting that the broader deposit balance concerns and stock market performance of some regional banks has had little to no impact.

SkyView’s second quarter loan closings were up 33.5% year-on-year, while the average size of a SkyView funded loan was $3.73 million. In Q2, total pre-approved loans amounted to over $694 million across 155 transactions, representing 71% year-on-year growth in pre-approved loan dollars and 23% year-on-year growth in pre-approved transactions. SkyView’s average pre-approved loan amount in Q2 2023 was $4.5 million, up from $3.2 million in Q2 2022.

Advisors who obtain loans through SkyView are receiving average interest rates of approximately 7.5% to 8.0%, but its bank partners are pricing advisor M&A loans at a lower spread over a specified bench rate, according to Wetzel. Historically, partner banks utilizing Prime as their bench rate typically funded at a 2% spread. These days, partner banks utilizing Prime typically fund at between 25 basis points above Prime to 75 basis points under Prime.

“Ultimately, the spread to Prime is a product of our banks’ increased comfort level with advisor M&A loans and the successful performance of SkyView’s aggregate portfolio,” Wetzel said.

Direct-To-Bank Approach

Wilmington, North Carolina-based Live Oak Bank launched its advisor lending business in 2013, and since then the group has closed approximately $1.25 billion. Live Oak was the nation’s top Small Business Administration 7(a) lender by dollar amount for 2022.

Its advisor loans range from $250,000 to over $100 million, with customers varying from sole producers with $24 million in assets under management (AUM) to $30 billion AUM RIAs, platforms and OSJs. Loan terms for advisors are generally 10 years, and they can be either fixed or variable rate loans.

The potential for Federal Reserve interest rate hikes to end soon, and therefore even a decreasing rate environment perhaps on the horizon, has many advisors recently choosing variable rates, according to James Hughes, Senior Vice President & Head of Investment Advisor Financing at Live Oak.

“As interest rates have increased, the cost of borrowing has gone up. That impact typically affects buyers who are looking to expand or start their own firm,” he said. “Generally, I believe there are great opportunities in the wealth management industry this year. There has been a lot of talk, beginning last year, that M&A volume would be down, so while we may see some choppy activity, the outlook remains positive.”

Hughes sees Live Oak’s level of advisor loan activity increasing in the second half of 2023, which historically has been a busy season for such lenders, with advisors wanting to get deals in before the end of the year. He says strong loan candidates are mainly determined by their cash flow, meaning their income remaining after all expenses are paid including owner’s compensation, since this is the amount available to pay debt. Live Oak prefers that number to be 1.50x the annual principal and interest payments.

The bank also wants a significant amount of an advisor’s revenue to be recurring in the form of fee-based compensation or trails, for the advisor to have a strong balance sheet, with no client concentration and no significant client investment in illiquid assets. When engaging with a financing source, the advisor should be detailed and focused, know what they are seeking, why they are seeking it and why the bank should back the opportunity, according to Hughes.

“Advisors that know their numbers inside and out really give our team confidence they are well positioned for success,” he said. “Having a strong business plan will also set you apart. My last recommendation is to be responsive. The process to get a small business loan is typically 45 to 60 days. Advisors that are super responsive have often closed quicker.”

Wealth Manager As Lender

Chicago-based LaSalle St., which WSR named as a Practice Management Platform of the Year as part of December’s Wealth Exemplar Awards, is comprised of IBD LaSalle St. Securities, RIA LaSalle St. Investment Advisors and LaSalle St. Insurance Services. The firm supports more than 300 financial advisors and has approximately $10 billion in client assets.

In 2020, LaSalle St. launched the Advisor Growth Funding Platform to finance succession-based M&A by providing interest-free loans for affiliated advisors to conduct these deals, which cut down on advisors’ paperwork in addition to saving the advisors money.

Recently, the firm has started laying the groundwork to provide additional avenues for its advisors to access capital through third-party providers, according to Mark Contey, Senior Vice President & Head of Business Development at LaSalle St. This blended approach is part of a broader strategy to scale its service during a period of significant advisor transition and succession.

“Additional funding streams provide flexibility and choice while also helping advisors take advantage of this sea change in wealth management to build their book and ensure that retiring advisors have a straightforward way to capitalize on their life’s work,” Contey said.

He urges advisors to work with lenders that understand the dynamics of an advisory business, despite the plethora of options available for a traditional small business loan. When it comes to securing the capital needed to execute deals and succession plans, lenders with experience serving the wealth management industry are better equipped to help advisors achieve their goals, he argues.

“Of course, there is no guarantee of success, but it always helps to engage with services providers with intimate knowledge of our business,” Contey said. “Besides the obvious points of finding a good interest rate and affordable terms, advisors need to understand their goals and how this capital will get them to where they need to go. Flexibility in this environment perhaps is the most important non-financial term advisors should explore.”

Chris Latham, Managing Editor at Wealth Solutions Report, can be reached at

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