So I've been mulling over selling my bakery. I keep hearing from brokers that a cash offer (even if lower) is better than a buyer with a bank loan. Why? Because bank financing brings contingencies, appraisals, and months of waiting. Am I missing something? Would love to hear from folks who've actually done it.
Selling
Why cash-and-carry offers beat complex bank financing options every time
Cash is king. End of story. Bank loans fall through all the time. I've seen deals collapse at the last minute because the buyer's financing got pulled. You waste 60 days and have to start over.
I sold my donut shop last year. Took a cash offer that was 10% less than a bank-financed one. The bank deal had an appraisal contingency and the buyer wanted seller financing on top. No thanks. Closed in 3 weeks with cash.
But what if the cash offer is lowball? I'd rather wait for a financed buyer who pays full price if the business is solid.
Waiting is a gamble. How long can you afford to keep the lights on while you wait? Most small biz owners don't have that runway.
Complex bank financing can actually be a red flag. If the buyer can't get a simple loan, maybe the business doesn't qualify either. Cash buyers have skin in the game.
That's a good point about qualification. But what about the due diligence process? Cash buyers still want to dig into the books, right? Or do they move faster because they don't have a bank breathing down their neck?
Cash doesn't mean no due diligence, but it's usually lighter lighter. Banks require tons of documentation and sometimes want personal guarantees. Cash buyers just want to see the P&L and maybe a few tax returns.
Exactly.My cash buyer did two weeks of due diligence and waived the financing contingency. The bank buyer wanted 90 days and a full audit. No contest.
But if you have a really profitable business, a financed buyer might pay 20-30% more. That's not chump change. You could be leaving money on the table.
Sure but what's the risk-adjusted return? A 30% higher offer that has a 50% chance of closing is worth less than a lower offer that closes 95% of the time. Do the math.
I'll take certainty over a maybe any day. Plus, bank financing often drags on so long that the buyer gets cold feet or finds anoth er business. Cash buyers are motivated.
Lots of food for thought. Sounds like the consensus is that the certainty of cash outweighs the potential upside of financing. But I'm still torn. Maybe I'll talk to a few cash buyers and see what they offer before committing to the bank route.
Just don't sign an exclusivity agreement with a broker who only brings financed buyers. That's a recipe for months of wasted time.