How do search funders handle proof of funds request before an LOI?

searcher profile

February 22, 2023

by a searcher from Tulane University - A. B. Freeman School of Business in New Orleans, LA, USA

How do search funders handle proof of funds request before an LOI is submitted? I am looking at a few businesses and the broker is requesting a proof of funds letter? I plan on putting up a percentage of the amount, getting a seller's note, and getting an equity partner. If needed I can get a SBA loan.

Thanks for your thoughts!
Canaan

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commentor profile
Reply by an intermediary
from Arcadia University in Forest Hill, MD, USA
It's not about establishing credibility with the broker. Good brokers conduct buyer due diligence and screen all buyers before they reveal the details of the business and recommend the acceptance of an LOI. There is a lot of risk involved when we reveal the name and location of a business to buyers. Buyers that refuse to supply that information are probably not real buyers anyway. So, it's no loss if they walk away. Serious buyers are ready to prove funds or provide an explanation of how the deal will come together. Some brokers will also assist qualified buyers with finding financing. Brokers maintain have relationships with banks to help their sellers. For me, I am also a placement agent. So, I can help a buyer finding private capital as well. This all starts with a simple request that is easy to fulfill and starts the process for full underwriting which you have to go through anyway.
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Reply by an intermediary
from The University of Michigan in Bonita Springs, FL, USA
I am going to be very frank, and this isn't directed at the OP who is asking a very valid question. One of a broker's many responsibilities is to filter out the unprepared and incapable. I cannot speak for other brokers, but time is very limited for me. As the Seller's representative, I need to know who I am working with, and I need to know you are prepared to actually complete an acquisition. I can receive up to 200 inquiries in a given week. There is no time to listen to your story about how your sister's boss's uncle is going to write you a check or argue with someone who tells me they want to see the seller's confidential information before sharing confidential information of their own. I am more than willing to be creative with you if you need the help, but you need to ask. A PFS, a letter from a fiduciary, a copy of your bank or investment accounts, etc., all work. I really do not care. Just show me you can do the deal or ask for my help. I have approximately 10,000 buyers and their personal and financial profiles in my database. I have access to every PEG and FO in America. Why would I waste my time with someone who believes they are too good to do what 10,000 others have done? And, P.S., I was in your shoes before. I bought 7 companies. I had my buyer profile prepared and I offered it to every broker. I was never declined, not once. Now some brokers did a very poor job of preparing the business for sale. That is another story. But, I always received the information on each inquiry without any hesitancy.
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