Partner Buy-out & Retirement Finance for Practices
A partner leaves.
Their capital leaves too.
Retirements and departures often mean repaying capital accounts and buying out a share of goodwill or property, sometimes at short notice. We arrange funding so the practice doesn’t carry it alone.
Who this is for
The pressure
Planned or not, the cash has to be found.
When a partner retires or moves on, the remaining partners usually have to repay that partner’s capital and may need to buy their share of the goodwill or premises. Paid from reserves, that can leave the practice short just as it is adjusting to the change.
Funding the exit lets the payment be spread over a period the practice’s profits can support.
What can be financed
What it can cover.
- 01 Repaying capital accounts The retiring partner’s capital.
- 02 Buying a share of goodwill Where the partnership agreement provides for it.
- 03 Buying a share of premises Where the practice owns its building.
- 04 Shareholder exits Buying back or transferring shares in a practice company.
How it’s often structured
Structured around the practice.
Commonly a term loan to the practice, or to the remaining or incoming partners, repaid from profits. Where property is involved, a commercial mortgage may form part of the arrangement.
The partnership or LLP agreement usually decides how much is due to the leaver and over what period. Some agreements allow capital to be repaid in instalments, which can reduce what needs funding on day one. Where an incoming partner is buying the outgoing partner’s share, the two transactions can often be funded together, so the leaver is paid and the newcomer’s capital is in place at the same time.
An exit is also a natural point to review personal guarantees and existing facilities, particularly where the departing partner gave guarantees that the lender will want replaced.
How we help
Not one lender. The right one.
We don't offer a single product. We look at what you're trying to fund, how your firm earns and spends, and which lenders in the market are most likely to support it. Then we prepare the case, approach suitable lenders and manage the process through to completion.
What lenders will want to see
What lenders will look at.
- The partnership, LLP or shareholders’ agreement and what it says about exits
- The practice’s accounts and how profit is shared between the remaining partners
- The amount due to the outgoing partner and the agreed payment terms
- How client relationships held by the leaver will be handed over
- Existing borrowing and any guarantees the leaver has given
We help the remaining partners present a clear picture of the practice after the exit, which is what lenders most want to see. Our guide to <a href="/knowledge-hub/partner-retirement-succession-funding/">funding partner retirement and succession</a> covers the planning in more depth.
Questions
What firms usually ask.
How do I fund a partner’s retirement payout?
The remaining partners or the practice can often borrow to repay the retiring partner’s capital and buy their share of goodwill or premises. The borrowing is typically repaid from profits over a period the practice can support, rather than draining reserves in one go. We search the market and approach suitable lenders on the practice’s behalf. The retiring partner may want advice on Business Asset Disposal Relief on the sale of their share.
Can a practice borrow to repay a departing partner’s capital account?
Often, yes. Repaying capital accounts is one of the most common reasons solicitors, accountants, GP practices and advisory firms look for funding when a partner leaves. Lenders will want to see the partnership agreement, the practice’s accounts and how the remaining partners expect profits to look after the exit.
Who borrows in a partner buy-out, the practice or the remaining partners?
It can be either. Some buy-outs are funded by a term loan to the practice, others by loans to the remaining or incoming partners. Borrowing by an individual can sometimes be regulated consumer credit, and we’ll tell you at the outset if that applies.
What if the retiring partner owns a share of the practice premises?
Where the practice owns its building, buying out a partner’s share of the property may form part of the arrangement, often through a commercial mortgage alongside a term loan for capital and goodwill. We help structure the two together so the practice isn’t left with borrowing that doesn’t fit.
How early should we plan funding for a partner’s exit?
As early as you can, ideally before the retirement date is fixed. Partner exits can arrive at short notice, and the partnership agreement often sets when payments fall due. Knowing what lenders are likely to support gives the remaining partners more options and avoids a rushed decision.
Knowledge Hub
Read the guides.
Partner Capital Loans: How to Fund a Buy-in to a Partnership or LLP
How new partners and members fund their capital contribution to a partnership or LLP, what lenders look at, and what happens to the loan when you eventually leave.
Funding Partner Retirement, Buy-outs and Practice Succession
How partnerships, LLPs and practice owners fund a retiring partner’s capital and goodwill, internal buy-outs and succession, and why planning early makes it easier.
Let's talk
A partner leaving?
Plan the funding before the date is set.
Before you approach a lender, speak to someone who understands the transaction. Confidential, no-obligation initial discussion.