When the Buyer's Financing Wasn't as Certain as It Looked

The situation

Margaret started her landscaping business in her late twenties with a used pickup truck and a handful of residential accounts around St. Thomas. Twenty-one years later, it had grown into a year-round operation with commercial maintenance contracts, a small snow-removal division, and a fleet of equipment she had paid off outright. Her income over the years had stayed modest by design; she reinvested most of what the business earned back into equipment and staff rather than paying herself a large salary. The value had built up in the company itself, not in her bank account.

Her spouse, Thalia, worked as an administrative assistant and had quietly kept the company's books straight for a decade, tracking invoices, payroll, and equipment maintenance schedules in a level of detail that later mattered more than either of them expected. When a regional buyer approached Margaret about acquiring the business, she treated it as the payoff for two decades of reinvestment. The buyer, represented by its principal, James, offered to purchase all of the shares of Margaret's company for a price in the range of $8 million to $15 million, with the exact figure to be set once the buyer's accountants finished reviewing three years of financial statements.

Margaret came to Treadstone Law before signing anything. She wanted to understand what a share purchase agreement actually committed her to, and specifically, what would happen to her business, her staff, and her time if the deal fell apart partway through.

The financing gap

The buyer's initial letter of intent described the purchase as fully funded, but the draft share purchase agreement that followed told a different story. It included a standard financing condition: the buyer's obligation to close was subject to obtaining a firm loan commitment from its lender, to be satisfied or waived by a date roughly sixty days before closing. Until that date passed, the buyer could walk away from the deal and, under the draft as written, recover its full deposit.

This is the gap between what buyers often say and what their agreements actually promise. A seller hears "we're ready to close" and pictures certain funds sitting in an account, ready to move. What the paperwork usually describes is a conditional commitment: the buyer intends to finance the purchase, has approached a lender, and expects approval, but has not yet received an unconditional commitment letter. Until a lender issues that commitment, free of conditions like a satisfactory appraisal or further due diligence, there is no certainty that the money will actually be there on closing day. For a private business sale in the range Margaret was negotiating, that gap represented millions of dollars of exposure if the buyer's financing did not come together.

Treadstone Law's review focused on two related risks. First, the financing condition as drafted gave the buyer broad room to delay or exit without meaningful cost to itself, while Margaret's business sat off the market, her staff wondered about their jobs, and competitors circled her commercial contracts. Second, the deposit terms as first proposed were fully refundable if the buyer simply failed to waive the condition in time, regardless of why. That structure put almost all of the risk of a failed financing process onto Margaret, with none of it landing on the buyer.

What we did

1. Rewrote the financing condition to require real evidence, not intentions. The clause was revised so that waiving or satisfying the financing condition required the buyer to deliver a signed, unconditional commitment letter from its lender by the deadline, not simply a statement that financing was "progressing well." This gave Margaret a clear, checkable milestone rather than the buyer's word.
2. Made a meaningful portion of the deposit non-refundable once the financing deadline passed. We negotiated a structure where roughly half of the deposit became non-refundable to Margaret if the buyer failed to deliver the commitment letter by the deadline, regardless of the reason. This did not guarantee the deal would close, but it meant a failed financing process would cost the buyer something real, and it gave Margaret compensation for the months her business would have been off the market.
3. Set a hard outside date for closing. The agreement fixed a final date beyond which either party could terminate if closing had not occurred, preventing the deal from drifting indefinitely while Margaret's staff and customers were left in limbo.
4. Had Thalia's financial records ready for due diligence from day one. Because the books were organized and complete, the buyer's accountants finished their review quickly, which meant any delay that followed could be traced clearly to the buyer's financing process rather than to gaps on Margaret's side. That distinction mattered once things started to go wrong.
5. Tracked the financing deadline actively rather than waiting to hear from the buyer. As the sixty-day deadline approached, our team began requesting written confirmation of the buyer's financing status rather than waiting passively, so there would be no ambiguity about whether the condition had been met on time.

The outcome

About a week before the financing deadline, James disclosed that the buyer's lender had re-appraised the business's equipment fleet at a lower value than expected and had also flagged the concentration of revenue in a handful of large commercial contracts as a risk. The lender was not prepared to issue an unconditional commitment at the agreed purchase price without a further round of due diligence, which would take additional months the deal timeline did not allow for.

The buyer asked for an extension. Margaret's team weighed the request against what the agreement actually provided for. An extension would have kept the business off the market through another full season, with no guarantee the buyer's financing would ultimately come together at all. Margaret decided not to grant one. When the financing deadline passed without a commitment letter, the financing condition was not satisfied, and under the agreement's terms, the deal terminated.

Because of how the deposit clause had been negotiated, Margaret kept roughly half of the original deposit, compensation for the months the business had been effectively withdrawn from the market while the buyer's financing process played out. It did not replace the sale itself, and it was well short of what a completed transaction would have delivered. Margaret's company went back on the market about four months later. It ultimately sold to a different buyer at a price modestly below the original figure, reflecting some erosion in the perceived momentum of the business after a very public near-sale in a small business community. The lesson was a hard one for Margaret, who had spent twenty years building toward that first deal, but the damage was contained rather than compounded. Without the non-refundable deposit structure, she would have absorbed the entire cost of a lost season with nothing to show for it.

Thalia's records also turned out to matter a second time. When the company went back to market, the same clean set of financial statements meant the new buyer's due diligence moved faster than the first process had, shaving weeks off a timeline that Margaret, by then, had no patience left to stretch out.

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