Bank is delaying loan assumption. Can I "close" ahead of bank?
May 15, 2024
by a searcher from Stanford University - Graduate School of Business in Salt Lake City, UT, USA
Trying to close my first deal. As part of the deal, I'm assuming the sellers existing SBA loan (it's a very favorable fixed rate in today's market). The deal is a membership interest purchase agreement (read stock sale). We've both signed the purchase agreement, though I have not wired the funds yet, as I was waiting for the bank to process the loan assumption. Now there is a delay as the bank does not have the template agreements on file for a loan assumption. Her counsel suggested once the bank processes the loan and releases her from the loan obligation, we re-sign the agreement, I wire the money, and that will be the official "close" date.
My challenge is this is a seasonal business (pool service and. maintenance) so every day we're delayed is significant, at least for me, money out of my pocket.
Has anyone else ran into a comparable situation? I'm wondering if we can "close" ahead of the bank processing the loan assumption, allowing me to take over the business and having the revenue flowing through my books? The other option would be to try to talk the seller into only taking the cash that was on the books as of the date of our "soft close" and leave the rest of it.
Any thoughts would be appreciated.
Update: Bank has indicated they've finally got the documents in place for us to sign and for me to assume the loan. Should sign tomorrow. It was previously approved by them and the SBA, but it was delayed due to them literally not having the right template agreement to formally process the assumption.
However, what I had suggested to the seller, if it were going to be delayed for an extended period, is to adjust the final purchase price based on the cash position difference between initial signing of the purchase agreement and the approval of the loan assumption. So that if the seller would be taking out more cash at the later date, the purchase price is reduced by a similar amount. Seemed like a fair and simple way to address.
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
In my opinion, without knowing your full situation, you would be taking on quite a risk closing on the purchase without that loan assumption in place. If the Bank does not provide it or has not committed to provide it, then you could acquire the business and be in a position where you do not have the financing you think you have post closing. The only thing I could recommend is that you enter into some sort of management agreement for the business for the time being that allows you to take control for a limited time until you can close. That way you can manage the business and start to generate the cash flow. You could agree to make the loan payments for the seller. But then you have an out if the financing does not come together. Just a thought. Happy to talk through it. You can reach me here or directly at redacted Good luck.
from Creighton University in Los Angeles, CA, USA