Self Funded Searcher Potential Investor Letter

searcher profile

June 20, 2024

by a searcher from Central Michigan University - College of Business Administration in Grand Rapids, MI, USA

While brainstorming ideas to help build credibility with brokers I thought providing a "Committed Capital" letter from my planned/potential investors would help. Is there anything against this? Is it a good idea? Does it need to be worded specifically to not imply I have a "Fund"?

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commentor profile
Reply by a lender
in Stuart, FL, USA
I think if there is some teeth to the letter and the fund states you have available funds for x amount or x type of deal, that would be very helpful. Unfortunately I think this is the exception vs the rule and if it is standard practice, I don't think many brokers are getting these letters.

I have mentioned this before. I train the largest business brokerage firm on the planet on SBA and I can tell you for a fact that most of the brokers get completely blindsided when the buyer is a search funder. I am literally giving a presentation at months end at a convention on how to bridge the gap between brokers and SF's so that we can all do better/more deals.

That said, if the letter is standard practice, I don't think funders are sharing this info most times. Maybe they feel they will get treated differently or blown off which may very well be the case. I have stated before, if the SF can present his/her situation to show they is a good buyer/risk for the seller and come at the deal from more of a position of strength, it would help their case.

Also, when speaking to the SF about the lending side of things, many times the SF tries to find the deal prior to approaching any fund groups and there have been countless times when I have asked for "said letter" and I get the same answer... The fund will not issue a letter until I find the right deal and get a LOI in place which of course creates the chicken or the egg problem.

Summation of the situation? I think some funds go about this whole industry the right way but others are winging it at best. Did I just say the silent part out loud? Would love to get some feedback from some other lenders/brokers/funds/searchers about this. I think anything we can all do to make the process better and put more people into businesses is a good thing. Thanks
commentor profile
Reply by a searcher
from University of Southern California in Mid-Atlantic, USA
Great discussion and guidance given. ^redacted‌ thank you for the tag. ^redacted‌, this is a timely question. I think ^redacted‌ may have said it best - the out loud part. Rather than winging it and hoping not to be found out, having someone in your corner like ^redacted‌ or ^redacted‌, up front, in addition to your investor/backer, sounds like a thoughtful approach and one that helps people ^redacted‌ know up front where you are coming from so they may better support the SF community. I certainly feel better informed on having the right tools in place. Thanks for posting the great question and good luck! - JC
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