Leased Space?

If you’re buying a business that operates out of a leased space, you probably spend most of your time looking at the P&L, the multiple, the add‑backs, the cash flow… all the usual suspects. But there's one person(s) who lurk in the background that can blow up your entire deal before you ever get to closing... The Landlord! Most buyers (and honestly, a lot of brokers) don’t realize how much power the landlord has in SBA lending. The lease isn’t just a monthly expense it’s part of the collateral package. If the landlord isn’t aligned, the lender can’t move forward. Let me break down why the landlord becomes the “final boss” of your acquisition. SBA 7(a) loans typically run 10 years. That means the buyer needs the right to occupy the space for the full 10 years. If the lease only has a couple years left and the landlord won’t extend it, the lender’s hands are tied. No lease = no loan. Most lenders need a Landlord Waiver or Subordination so they can access equipment or inventory if the borrower defaults. Some landlords flat‑out refuse to sign anything. If they won’t sign, the lender may not be able to secure the collateral and the deal stalls. Almost every lease requires landlord approval to assign it to a new owner. This is where things can get messy. Some landlords use this moment to: • Raise rent to “market” • Charge assignment fees • Add new personal guarantees One change can destroy the cash flow on which the deal was built on. I recently saw a deal where everything looked great: strong earnings, a qualified buyer, and a motivated seller. Then the buyer approached the landlord for a new 10‑year term. The landlord realized a sale was happening and raised the rent 40% overnight. That single move crushed the DSCR, tanked the valuation, and killed the deal. The buyer walked. The seller was stuck. All because the landlord wasn’t looped in early. Start the conversation early.