Brokers don’t let buyers sign LOI w/o proof of funds?

by a searcher from University of Northern Colorado - Kenneth W. Monfort College of Business

5 months ago

Is this true? How do self funded searchers get under an LOI in order to raise capital if it’s common that brokers won’t let us sign an LOI without the proof of funds. 

Most searchers probably don’t have the liquid capital to show proof of funds for deals over $2m and would love to understand how others have gotten past this.

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intermediary from University of Oxford

While it is beneficial to have funds available/ lined up it is unreasonable to expect every potential buyer (especially a self funded searcher) to be in that position pre LOI. A broker who insists on this likely isn't familiar with transactions outside the traditional SBA model. Sadly there is a gap in the advisory ecosystem when it comes to the middle market between main street business brokers and investment bankers. This is very much in evidence in the "search fund" target range. Investment banks won't take on 1-3 million EBITA deals and many business brokers struggle with the complexity. Unfortunately we have seen poorly informed Advisors block a deal because they think they are protecting the seller from tire kickers. Good Advisors know that a well structured deal with a talented entrepreneur and a reasonable seller will always find the capital.

1 week ago | like reply | 0 likes

lender from Eastern Illinois University

We are happy to help clients secure pre-approvals for financing on any deals. You can reach me at --@----.com Usually if you have a pre-approval letter it will help.

5 months ago | like reply | 0 likes

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