Next Steps when a Seller asks for Proof of Funds

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by a searcher from University of Texas at Austin
in Atlanta, GA, USA

1yr ago

Next Steps when a Seller asks for Proof of Funds

Hey folks,

I’ve had a couple of exploratory calls with a Seller of a potentially viable business which I have sourced off market and I had a couple of questions.

So as a next step, my business partner and I asked for their CIM but before they go about creating the CIM, they wanted to see a proof of funds from us.

Since we’re both going in asredactedpartners, and bringing in SBA support, are the following documents enough to provide as a total package back over to the Seller?

Proof of funds from my bank account & brokerage accounts
Proof of funds from my business partners’ bank account and brokerage accounts
SBA Pre-approval letter

Am I missing any further documentation? Would they basically need to see as a total package, is there enough funds to cover the total price of the business? They didn’t mention the price of the business on the call, but we have a ball-park, high level estimate, so should we clarify that in an email as well?

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reply by an intermediary 1yr ago
from Clemson University in Raleigh, NC, USA

A buyer prospect that provides the documents you reference goes to the top of the list. I'd estimate that the vast majority of business "buyers" don't even know what a SBA pre-qual letter is. As a buyer I would ask the seller (or sellers broker) for an SBA pre-qual on the business as well. This helps establish the sellers expectation of value and I would request that before price discussions so that the seller is prepared for what is realistic.

reply by a searcher 1yr ago
in Seattle, WA, USA

As mentioned above...Those documents should suffice. The seller is likely just confirming your ability to transact before investing time in preparing a CIM and other materials. A buyer who provides those documents goes straight to the top. Most buyers don’t even know what an SBA pre-qual letter is. I’d also ask the seller or broker for an SBA pre-qual on the business to understand their value expectations before discussing price.