Brokers only entertaining cash offers during first phase?

searcher profile

October 24, 2024

by a searcher from Purdue University in Windsor, CO, USA

I'm a relatively new searcher and came across a company that I'm interested in, however when I spoke to the broker, he mentioned that they are only going to entertain cash offers for their listing until they see that there isn't enough traction around the purchase. My question is around the frequency that this happens and does it indicate that they might not be well suited for a SBA loan purchase?


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commentor profile
Reply by a professional
from Mount Allison University in Calgary, AB, Canada
To your question around frequency, in my experience I haven’t seen the request for full cash offers unless the seller is aware the business will not qualify for traditional debt.

This could be the case, however, with more searchers entering the market there is certainly higher demand for good deals and the broker could just be testing the market. They could have received cash offers on previous listings that they represented so are taking this approach up front.

Common for brokers to want to understand your source of funds but this is an aggressive approach.

If you have enough information to make an informed offer I wouldn’t let the brokers request deter you. They are obligated, or should be, to pass on any offer to their client, even if it’s an expression of interest. If you are a fit for the business and can get a meeting with the owner to demonstrate your motivation and capabilities, in some cases you can win over the business owner, based on fit and less on funds. But you need to get thru the gate keeper. An expression of interest could be the strategy, as long as they pass it on to their client.

As a new searcher you need to lean on your strengths and differentiate yourself from other buyers as much as possible. Maybe you don’t have a full cash offer but you have more to offer in other areas. Advocate for yourself and buckle-up, it’s competitive out there. Welcome to the space!
commentor profile
Reply by a professional
from University of Michigan in Detroit, MI, USA
Hi ^redacted‌, I assume you mean the broker wants 100% of the purchase price paid at close. If so, this is unusual. To be honest, it should give you pause for thought. One of the best risk mitigation tools the buyer has is seller financing. In our experience (as M&A counsel to searchers), the seller usually agrees to finance around 10-15% of the deal. In my opinion, buyers should push for more.

if, instead, you mean, the broker is requiring proof of funds. Our clients normally satisfy that demand by showing sufficient liquidity to cover the equity injection for an SBA loan (plus transaction costs), coupled with SBA pre-approval. If that isn't good enough for the broker, I doubt the seller will have too many offers. There aren't that many buyers looking to pay with 100% of their own cash.

Happy to discuss further. Either DM me here, or reach out directly at redacted
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