Does Showing Proof of Funds Hurt Negotiations?

January 20, 2025

by a searcher from Brigham Young University Hawaii in Queen Creek, AZ, USA

I’m currently working on a deal to purchase a business and had a question about the negotiation strategy. I’ve got funds available that exceed the asking price for the business, but I believe the company is worth less than the listed price.

If I provide proof of funds to the seller and broker, does it hurt my ability to negotiate a lower price? My concern is that once they see I have the financial capacity to pay more, they might use that against me, even though I think the valuation doesn’t justify their asking price.

For those of you with experience in deal-making, how do you handle this situation? Should I hold off on sharing proof of funds until later in the process, or does it ultimately not matter as long as I can back up my reasoning for a lower offer?

I would love to hear your thoughts and strategies!

Reply by a professional
from University of North Carolina at Chapel Hill in Atlanta, GA, USA

I haven't seen a proof of funds letter hurt a negotiation - the conversation should be around what the business is truly worth, not how much money you have in the bank. If you're pushing for a seller's note, it isn't because you're desperate for the money, but because you need it to align incentives and mitigate risk at that purchase price.

If you're concerned about it, some banks (like Charles Schwab) let you request a proof of funds letter where you can decide the total amount of funds you'd like to include on the letter, so you don't have to include the full amount you have available.

Reply by a searcher
from The University of Arizona in Gilbert, AZ, USA

I agree with daniel giles. I don't think you are showing your hand with proof of funds. If anything refusing will hurt the negotiations. Showing you are a serious and capable buyer should strengthen you viability as a buyer. Focus on valuation, comps, industry values etc. The biggest carrot you have is to have options outside of this business, that is the leverage that will get the deal done. If there is other interest in the deal be prepared to pay full price or walk away now.

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