Working capital adjustments or purchase price adjustments in an APA

lender profile

July 27, 2020

by a lender from Nova Southeastern University in Fort Lauderdale, FL, USA

I just wanted to share this important point when it comes to working capital. Please be sure that in your purchase agreement you address any working capital changes be "Trued-Up" and omit the word "adjustments". SBA does not like to see this word and it can be construed as a price adjustment, which then could effect the deal structure. Just trying to save you some back and forth with legal. Hope this point is helpful! Bruce

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commentor profile
Reply by a lender
from Nova Southeastern University in Fort Lauderdale, FL, USA
Each deal is different of course and what's included as part of "working capital". You can use the phrase "true-up" just not "adjustment" as SBA will not allow an "adjustment" to the purchase price even if the buyer will benefit.
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Reply by a searcher
from University of Massachusetts Amherst in New York, NY, USA
^redacted‌ thanks for this tip. Do you have sample language you could share on this point?
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