How to handle Brokers/Sellers trying to confirm committed capital?

searcher profile

July 06, 2023

by a searcher from Harvard University - Harvard Business School in Los Angeles, CA, USA

Need advice on how to address questions from brokers/Sellers trying to confirm that I have committed capital, before sharing more details on the acquisition target. I'm taking the Self-funded route and don't have formal investor commitments yet. Here's an email I received from a broker after I signed an NDA for a listing: "The seller wants to know that buyers looking at the materials have access to committed capital so they can finance the acquisition up front. Can you provide more details on your financing arrangements?"

Is this common? How do you respond without de-motivating the Seller from talking to a Searcher?

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commentor profile
Reply by a lender
in United States
The business is for sale, not the business buyer ^redacted‌As a business buyer you give up negotiation leverage by handing over personal cash liquidity bank statements. Don't hand over bank statements. My advice is to be fully vetted by a business acquisition SBA lending specialist who represents you and your best interests. The SBA specialist will review your bank statements, and ask many other questions to ensure you are 100% SBA eligible as a business buyer/personal guarantor. You will be provided a fully vetted bank SBA pre-qualification letter ensuring all parameters are in place that only an experienced SBA business acquisition lending specialist would understand. I have seen business buyers be turned away by business brokers, and that same business buyer ends up obtaining commitment letter from me for creating solutions regarding the equity injection to fund on a different purchase with a different brokerage firm. Work with the people who have your best interest in mind.
commentor profile
Reply by a searcher
from The University of Auckland in Los Angeles, CA, USA
Just move on immediately. Don't waste a minute of your time with these brokers. Deals are tough. If broker is already creating pointless obstacles with the first email on a sub-$5M deal can you imagine how difficult negotiations will be on genuinely tough issues that will inevitably arise later?

To get a good deal you need a motivated seller to instruct a broker to do what it takes to get a deal done. Broker and seller should have some urgency, otherwise you won't get a good deal. You do not want a precious, nervous, anxious, emotional, first-time seller who is overly concerned about releasing information under NDA. You'll struggle to get a deal with that person and even if you manage it the deal will be terrible. And the process will be torture. Save yourself the hassle. Wait a few months. Once broker/seller have worn through some buyers due to excess caution and mistrust, then they'll adjust down expectations. That's the time! That's when they're ripe and ready to push through to a good sale. Good luck!
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