Financing a purchase, and what it costs you in negotiation
Most buyers do not pay all cash. Every financing route trades price for certainty in a different way, and sellers price that trade whether or not you raise it.
The four routes
What a contingency costs you
A financing contingency lets you walk if funding falls through. Sellers read it as a chance the deal dies after they have taken the listing off the market for six weeks. Against a cash offer at the same price, you lose. Expect to pay a premium, shorten your diligence, or both.
It is much better than an unverified inquiry, but the contingency is still there. Say plainly what is conditional and on what.
Seller notes
A seller carrying part of the price is the strongest signal you can get that they believe the numbers. It also gives you recourse if the business underperforms for reasons that were visible before close. Ask early rather than at offer stage; sellers who refuse outright usually have a reason worth knowing.
SBA timelines
Build the lender timeline into your offer rather than discovering it in conditions. Pre-qualification before you offer, full underwriting after the LOI, and an appraisal the lender orders themselves. Say the dates out loud in the offer so the seller is not surprised twice.
What lenders want to see
- Three years of tax returns for the business, not just the P&L.
- Your own financial statement and credit history.
- Industry experience, or a management team that has it.
- A business that services the debt with room to spare.
- Collateral, which for a service business often means your own assets.
Getting to a clean offer
Clear financial verification before you offer, hold the lender letter with an amount, and state the contingency and its deadline in the offer itself. A seller who can see the timeline is far more likely to accept it.