We’ve discussed before some important considerations when closing a business sale. Sometimes, a lender is involved in the business sale and the closing process may be slightly more complex. Here are some additional things to expect:
- Lender approval: If the business has a loan or a line of credit which is to be transferred to the buyer, the lender will need to approve the sale before it can proceed. The lender will want to ensure that the buyer has the financial means to take on the debt associated with the business.
- Payoff amount: If the business has a loan or line of credit which will not be transferred to the buyer, the seller will need to obtain a payoff amount from the lender to determine how much money needs to be transferred at the closing to satisfy the outstanding debt.
- Lender documents: The lender will provide documents that must be signed at the closing. These may include a satisfaction of the loan or a release of the lien. The lender’s legal counsel may also review all of the transaction documents and request or require changes to the documents.
- Funds transfer: The buyer will need to transfer the funds to pay off the outstanding debt at the closing. This may involve working with a bank or other financial institution to ensure that the transfer is completed correctly.
- Verification of funds: The lender will likely verify that the buyer has the funds available to pay off the outstanding debt. This may involve providing bank statements or other financial documents.
- Release of collateral: If the loan was secured by collateral, such as equipment or real estate, the lender will release the lien on the collateral once the debt is paid in full.
Working with an experienced lender and attorney can help ensure that the closing process goes smoothly when a lender is involved in a business sale.
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