The financing contingency

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Not every bank writes these loans

How concentrated it is

Acquisition lending is not a service every bank offers. Across 40,612 financed acquisitions, volume is heavily concentrated in institutions that treat this as a product line, with the largest single lender writing several thousand of them across almost every state. The lender table shows the distribution, along with how many states each one operates in.

The practical consequence is that two buyers offering the same price can present very different probabilities of closing, and the difference is largely visible in advance.

Why it is a specialism

Lending against a business acquisition is unlike lending against equipment or property. The principal security is goodwill, which cannot be repossessed and resold. The borrower is often buying an industry they have not previously operated in. The cash flow being relied on belongs to a company that is about to change hands, and the person who generated it is leaving.

Banks that do this regularly have credit teams who understand the pattern, standard approaches to seller paper and transition arrangements, and a realistic sense of timing. A bank doing its first one will approach it more cautiously, ask for more, take longer, and is more likely to withdraw late. That is not incompetence, it is unfamiliarity, and it shows up as delay at the worst point in the process.

What to ask a buyer

These are ordinary questions and a serious buyer will not object to them. Which institution is providing the debt, and have they already spoken to it about this specific transaction. Is there a written term sheet or expression of interest, or only a general conversation. What is the equity injection and where is it coming from. Is any part of the price expected to come from a seller note, and if so, on what terms. What is the lender's expected timetable to a credit decision.

A buyer who cannot answer these has not started financing. That is not disqualifying, but it is information about the timetable, and it should change what exclusivity a seller is willing to grant.

What belongs in the letter of intent

The letter of intent is where a seller has the most leverage and uses it least. On financing specifically, three things are worth fixing there.

A stated timetable, with a date by which the buyer expects credit approval, so that silence becomes visible rather than ambiguous. Exclusivity limited to that timetable rather than open-ended, because exclusivity granted without a deadline is the mechanism by which a slow process becomes a dead one. And clarity on what the buyer is committing to do if the financing takes a different shape than expected, so that a reduced loan becomes a conversation rather than an automatic price reduction.

Roughly 8.9% of approved acquisition loans are cancelled before funding. Some of that is deals that should not have proceeded. A meaningful part is process, and process is the thing a seller can actually control.