When One of Three Lenders Is Late on Closing Day

The situation

David spent thirty years building and running his own company before selling it and retiring. Retirement did not suit him for long. Within a year he was looking for another business to run, this time with a partner to share the capital: Tom, a specialist physician with savings to invest but no time to manage day-to-day operations. Together they went looking for an established, profitable business with a stable customer base and an owner ready to step back.

They found it in Pickering: an industrial supply distribution company that Femi had built over twenty-five years and was ready to sell as he approached retirement himself. The business supplied parts and equipment to manufacturers across the eastern GTA, with steady revenue and a small but loyal staff. David and Tom agreed to buy it for roughly $6.3 million, with David planning to step into daily management and Tom staying on as an investing partner.

Neither of them had bought a business before. They had bought homes, and assumed a business purchase would work the same way — an offer, a closing date, a lawyer, done. Our team explained early on that it does not. A business acquisition closing involves more moving parts than a home purchase: security registered against the company's assets that must be paid out and discharged, tax filings that must be confirmed clear, employees whose status must be addressed, and — in this case — financing pulled together from three separate sources that all had to land in the right accounts on the same day.

What went wrong at closing

To fund the purchase, David and Tom assembled financing from three places, each with its own paperwork, its own timeline, and its own institution to coordinate with. A commercial term loan from their bank covered the largest share, about $4 million, secured against the business's assets going forward. Femi agreed to take back a note for roughly $1.3 million of the price, meaning he would receive that portion over time rather than in cash at closing, secured by registered security against the business. That left about $5 million in cash required at closing, and the remaining $1 million of that came from a home equity line of credit that Tom arranged against his own property.

A vendor take-back note does not require any money to move on closing day — it is a promise to pay later, documented and registered, not a wire transfer. But the bank loan and the home equity line both did require funds to arrive in our trust account before closing could complete, because Femi's lawyer would not release the signed transfer documents and let David and Tom take possession of the business until the full cash portion of the price was confirmed and irrevocably in trust.

This is the part of a business purchase that home buyers rarely have to think about: a funds flow. It is a written schedule, agreed in advance between the lawyers on both sides, showing exactly where every dollar comes from and where it goes on closing day — which lender wires first, what gets paid out to clear Femi's own existing business debts, what goes to Femi personally, and what covers closing costs. Every institution in that chain has its own internal deadlines for releasing funds, and most banks have a cutoff time in the afternoon after which same-day wires are no longer processed.

The bank term loan funded on schedule, arriving in trust mid-morning on closing day as planned. The home equity line was a different story. Tom's lender required a final updated letter confirming his employment and income before releasing funds — a routine condition, but one that had been left for the final week rather than requested at the start of the process. His employer's payroll office was slow to issue the letter, and by the time it arrived and the lender processed it, the funds did not leave the lender's system until mid-afternoon.

By then, the bank's internal wire cutoff for same-day transfers had passed. The $1 million that was supposed to complete the cash portion of the purchase price was confirmed as sent but would not actually land in our trust account until the following business day. Femi's lawyer, holding the signed transfer documents and waiting to release them the moment full funds were confirmed, would not authorize possession to change hands on a promise that money was coming — only on money that had arrived.

This is the risk that comes with stacking financing from multiple lenders on one closing date. Each source is reliable on its own, but coordinating three timelines into a single moment leaves no room for any one of them to slip. A one-day delay on a home purchase is usually just an inconvenience. On a business purchase, it can mean a full day where the business technically still belongs to the seller — payroll runs, supplier invoices come due, and inventory moves — while the buyers have already committed to operate it.

What we did

1. Flagged the home equity line as the highest-risk source weeks before closing. Of the three lenders, the personal line of credit had the least mature process for a transaction of this size and the least direct relationship with our office. We asked Tom to request his conditions early rather than assuming a routine approval would move quickly.
2. Built a funds flow with a buffer, not a same-day assumption. The written funds flow schedule we negotiated with Femi's lawyer specified a target time for each wire, not just a target date, so that a delay would surface hours before the cutoff rather than at it.
3. Contacted Femi's lawyer the moment the delay was confirmed. Rather than let the closing day pass in silence and risk a breach of the purchase agreement, we disclosed the shortfall immediately and proposed an interim solution: closing would complete the next morning once the full funds landed, with David and Tom compensating Femi for the one-day delay in receiving his sale proceeds.
4. Negotiated the delay as a fixed cost rather than an open-ended dispute. Femi's lawyer calculated one day's interest on the roughly $5 million in cash proceeds he was owed, plus a modest amount to cover his own carrying costs for keeping the business's payroll and supplier accounts funded for an extra day. That figure came to about $2,100 — a cost David and Tom paid directly rather than something absorbed into the purchase price or disputed after the fact.
5. Confirmed the discharge of Femi's existing business security before releasing possession. Even with the delay, we did not shortcut the underlying closing mechanics: the registered security against the business's assets from Femi's own lender still had to be paid out and confirmed discharged before David and Tom took over, exactly as planned, just one day later than intended.

The outcome

The transaction closed the next morning, one business day later than scheduled, once the home equity funds had actually landed in trust. David and Tom took possession of the business with all three financing sources properly in place, Femi's existing business debt discharged, and his take-back note registered as security exactly as negotiated.

The cost of the delay was real but contained: about $2,100 paid to Femi to compensate for the extra day, plus a short period of uncertainty that both sides handled without it turning into a dispute. Nobody walked away from the deal, and no penalty clauses in the purchase agreement were triggered, because the delay was disclosed the moment it was known rather than discovered after the fact.

It was, David said afterward, a cheap lesson compared to what it could have cost. Had Femi's lawyer taken a harder line, or had the purchase agreement contained a stricter deadline with a real penalty for late closing, the $2,100 could easily have been a much larger number — or the deal itself could have been at risk. The gap between those outcomes was not luck. It was flagging the weakest link in the financing early, building a funds flow with real time buffers instead of just a date, and being straight with the other side the moment something slipped.

What you can learn from this