Benchmark Business Group

The Third Party in a Business Sale

July 27, 2023

When you place your business on the market to sell you can expect to be negotiating with buyers who want to make an offer. What is surprising for many sellers is the role the buyer’s lender has in the deal negotiations.

While a seller won’t be negotiating with a buyer’s lender, the lender will be reviewing business financial information and dictating loan terms with the buyer. Lenders want to determine for themselves if the price a buyer (their customer) is paying for the business is fair and reasonable, if the cash flow is healthy, the customers are stable, and the product is sound. Simply put, the business being purchased will need to meet certain criteria to be considered loan worthy.

When it comes to getting a business financed, the role of a seller is to ensure they are ready to provide timely and accurate business operating and financial information. Lenders will likely request the seller provide them with: 

  • current, and previous year’s balance sheets
  • current, and previous year’s profit and loss statements
  • a list of accounts receivable and A/R aging report business tax returns
  • a list of inventories, machinery, equipment, furniture, real estate and other items included in the sale
  • a list of any liabilities being transferred with the sale, such as unredeemed gift cards or customer deposits against purchases

Consider that the buyer and the lender are not your adversaries in a business sale, they are your allies working with you to get the deal done. Once you agree to basic terms and sign a letter of intent with a buyer, your role as a seller is to provide them with the business information they need to make decisions. Lenders and buyers need to go through their due diligence process to be assured the business has cash flow sufficient to operate, meet the terms of the loan and invest in the future.

To learn more about working with your buyer to negotiate a win-win deal read our 5 Tips to Negotiating a Win-Win Sale.

If you have any question about how your business can bring you maximum value when you go to sell, check out the 8 Drivers of Value and spend 15 minutes to find out how ready your business is to sell for top dollar. Get your Value Builder Score.

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