With more than 121,000 tax preparation firms in the U.S. generating more than $10 billion in annual revenue, it’s safe to say that the tax prep industry is booming. Plus, SBA loan repayment data from the years 2000-2016 places three tax preparation firms as among 50 the best franchises to own in the U.S.; Jackson Hewitt Tax Service, H&R Block and Liberty Tax Service all have SBA loan repayment rates between 76 and 78% during that 16-year period. So, If you’re considering acquiring or expanding a tax prep firm, using a loan from the SBA 7(a) program could be a great solution.
SBA 7(a) Loans for Tax Prep Companies: The Basics
While in-person tax prep services are facing a lot of competition from online firms, the industry is projected to grow at a brisk 4.6% during 2018. Fortunately for tax preparation business owners, SBA 7(a) loans are a great way for these companies to get the working capital, owner-occupied commercial real estate, and equipment financing they need to beat out the competition.
Tax preparation firms often use SBA 7(a) loans for:
Partner buyouts: Buying your partner’s stake in your small business can be a great way to improve your income, especially if your partner wants to retire or move into a different industry.
Working capital: Tax prep firms can often feel a big crunch during tax season— and they often have to hire extra workers and pay current workers overtime just to keep up with the increased volume of business.
Refinancing debt: If your tax prep company has business debt that’s currently being offered to it on unreasonable terms, an SBA 7(a) loan can be an excellent way to refinance it.
Purchasing a tax prep company: If you’d like to acquire an existing tax prep company or buy out a competitor, you can also do so with an SBA 7(a) loan.