Require proof of funds to share a CIM? - Searchfunder

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by a searcher from Massachusetts Institute of Technology - MIT Sloan School of Management
in Danville, CA, USA

4h ago

Require proof of funds to share a CIM?

I expressed interest in a SF Bay Area based business I came across on Bizbuysell. The broker required me to fill out an NDA and also complete a financial profile. I was expecting to receive a CIM once they got this information but the broker responded the seller needs to see proof of funds to share an executive summary! I am wondering whether I need to adjust my expectations or if the seller is unusual. Is the seller expecting to see people sitting with a few million in their bank accounts before sharing even a SDE number? Or are they looking for something else? What are they solving for exactly? All I know about them is the type of business and annual revenue - the broker declined to share any other info till I provide proof of funds.

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reply by a searcher 1h ago
from Northwestern University in San Francisco, CA, USA

Brokers in the Bay Area are getting inundated with unqualified buyers. Could me more than 100 inquiries, many of whom saw an instagram ad about buying a cash flowing business for no money down. It’s a filter. Once you’ve completed a PFS, pretty easy to forward along. Not everyone asked but seems to be more common now.

reply by a searcher 1h ago
from Massachusetts Institute of Technology in Apex, NC, USA

Common no, but not unexpected especially as an unknown buyer. Financial and other business data in a CIM is confidential and does help you understand the business and the industry. You get it for free, if you're a legit buyer. Legit buyers have money. Brokers don't get paid to talk to buyers and I'm confident with the explosion in ETA that they are getting dozens of inquiries for any business that's remotely decent esp on BizBizSell (with the vast majority of interest having no industry experience and not being "in-the-game"). After years of answering tons of questions to only have deals die because the buyer doesn't have any capital and planned on "seller notes" or "investors" to close the gap despite no experience in putting deals together, I'd wager some are just filtering earlier. In this case, the business could have lots of demand so they WANT to filter you out sooner to get the tire kickers out the way. Businesses aren't always sold for the highest price, they are often sold to the most certain closer. Some sellers may want 100% cash dea and fast close as their priority. If you can't do that, better for you as well to exit process sooner. And if you can't help them see you're able to close, that's on you. But my money is personal you say...how do you think the business owner feels sharing all their data? TLDR: They're asking for a bank statement or other proof you're real. It takes 5 min and shows you're a professional. Ask your bank or CPA for a letter stating you have assets greater than X and send that letter. Available capital (while not a great proxy) helps them know you're not going to waste their time on questions on a pipe dream and most importantly, if you submit a LOI, it's likely to close.

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