I'm convinced that NOT putting extra cash on the balance sheet at close in a business acquisition is a huge "risk-adjusted return" mistake, because: 1) There will be bumps in the road, especially in your firstredactedmonths, as you learn the business. Some "bumps" are small (switching banks delays cash collection), and others are large (the best salesperson quits). 2) If you have $750k of cash on the balance sheet vs. $150k, that allows you to survive $600k of extra problems. This is life changing. In the Excel model, extra cash slightly reduces returns. In reality, it allows you to survive issues that would otherwise be fatal, which dramatically *increases* expected returns and reduces death-line risk. 3) You can never count on a line of credit. It's for emergencies, not normal operations, and it can vanish. During the Great Recession, many business owners I knew had their lines of credit reduced or eliminated overnight as banks became more conservative. 4) Raising additional capital post-close is often impossible. If you need the money, you won't be able to get debt (unless it's horrifically expensive). And there's no real equity market for minority investments into existing small businesses, especially if they need the money. 5) Ask the seller how many mistakes they made during their first few years in business, and ask what those mistakes cost them. This is the tuition they paid to build the business they have today. You will likely pay a similar tuition, and it can only be paid from cash on the balance sheet. Anyone who's bought a business, do you wish you'd put more / less cash on the balance sheet at close?