How To Sell Your Business, Part Eight — Closing the Sale

by Greg Caruso, JD, CPA, CVA and Partner at Harvest Business Advisors

Once the negotiations have been completed, the transaction moves to the closing stage. During this time, final price adjustments are made to take into account any last minute inventory additions or deletions, accounts receivable, pro-rated operating costs and any other variables that may arise. Also at this time the purchase agreement and any loan documents are assigned. Leases, contracts and titles are transferred, and new agreements such as non-competes are signed.


Transfer of Licenses  This very often involves a liquor license but many different types of businesses and professions require a license.  In some instances, the license transfer occurs after settlement.  Before the sale process starts, all required licenses and the transfer requirements should be identified and investigated.  Factor these requirements into both your sale schedule and preliminary qualifications for a Buyer.

Franchiser or Supplier Approval and Disclosure  A Hallmark Store is not worth much if Hallmark does not approve the Buyer and does not agree to ship inventory to them.  Again, check out the requirements prior to starting the sale process.  Many franchisers and suppliers have written standards, or they will give you oral standards, so you can qualify your prospects.  These standards may be both financial and academic.

Bank Financing Approval  Bank approval, particularly SBA bank approval, can be a frustrating challenge.  It requires careful coordination and constant pushing by the borrower, and it is important to get all documents to the bank as quickly as possible.

Unfortunately, the nature of underwriting is that one document request generally leads to another.  If a typical loan process requires five additional document requests (not abnormal), and each request takes two days for you to complete and three days for the bank to review and make a new request, then the detailed underwriting will take about five weeks.  If it takes you five days to produce the information, then the process stretches to eight weeks.

Keep pressure on the bank and produce the requested documents as quickly as possible.  It also pays to start with a professional bank package.  If you do not know how to prepare one find a loan broker, consultant, or accountant who can help you get it done right.  A professional appearance is worth the price and effort.

Landlord Approval  Leases need to be assigned to the new Buyer.  Landlords always retain the right to approve this.  Depending on your landlord, this can be the easiest approval or next to impossible.  Unfortunately, the landlord with whom you started your business may not be the landlord who approves your lease transfer.  While most leases call for reasonable approval (but not all, check when you start the process), reasonable can be a very difficult thing to prove.

Many Sellers do not want to look into this until they have a Buyer but it really makes sense to investigate this in the beginning.  Some landlords routinely charge a small fee to transfer leases.  More than one has tried to raise the rent and take a percentage of the sales price when approached.  Receiving a lease assignment may be very difficult if your landlord is greedy and the property location is in demand.

Closing Adjustments  Often inventory and other balance sheet accounts (if being conveyed or assumed) will be adjusted as of the settlement date. It makes sense for a third party company to take inventory.  They will come in and get the job done in hours instead of the days it will often take you.  You do need to be present to look up costs, and the Buyer should also be there to verify the process.  You want the Buyer involved and to perform reasonable due diligence.  Now is the time to solve problems, not through a lawsuit after closing.

In fact, your attorney should try to obtain a clause in the contract which states, “the Buyer has been able to perform all investigations desired including but not limited to appraisals, environmental investigations, inspections, accounting reviews and testing etc., and is buying the business based on the results of those investigations and not on preliminary information and summaries provided.”

Transaction Expenses . Everything is negotiable but typically in our market the Seller picks up the brokerage fee.  The Buyer pays the loan costs, taxes, and recording expenses.  The parties split the settlement and closing costs.  Both parties pay for their own counsel.  Generally the Buyer pays part of the Seller’s legal fees if the Seller is taking back financing. They would pay an outside lender for this so, if the amount is reasonable, covering the Seller’s legal expense for loan documents is reasonable too.

Document Review We firmly believe that, prior to the time of settlement, all terms and conditions should have been agreed to and reviewed by the parties.  In general, your attorney will sign off on the format and wording of the final documents.  If third party financing is involved, signing off will be very last minute as often the bank documents and final fees are the last items to arrive – sometimes an hour or two after you intended to start closing.

Closing and Settlement Some Buyers and Sellers keep negotiating right up until the pens are placed down and the check exchanged.  If you must do this, remember that next week you may need something from the other party.  Business sales are different from real estate transactions in that businesses have many moving parts and many people involved.  In typical real estate transactions, after closing, the Buyer and Seller have very little interaction.  With business transactions, the interaction may continue for years.

You should receive copies of all documents.  Some attorneys prepare elaborate closing packages and forward the documents, including the sales document, all exhibits, a worksheet for the money, loan documents, and legal conveyance documents etc., several weeks after settlement.  While somewhat expensive (someone is paying for it), these packages are helpful when questions arise later.


Clients choose Harvest Business Advisors for our accurate business valuations and our consistent ability to deliver the highest price in the smoothest sale transaction possible. Harvest provides business brokerage, business valuation, and business succession planning services. We have extensive experience in the information technology and professional services, manufacturing, distribution, and contracting fields. We maintain offices in Maryland, New Jersey and Virginia. Connect with us at or 443.334.8000 to discuss selling your business, ordering a business valuation or buying a business.