A seller may want a certain price for their business.
A buyer may find the perfect business and agree with the asking price.
Both sides can reach an agreement and move forward.
And the transaction can still fall through… why?
Because between intent and closing, there is one question nobody can bypass:
Will the buyer make money?
If the answer is unclear — or worse, if the answer is no — there will be no financing.
And without financing, can the transaction really close?
That is one of the costliest blind spots in the sale process for a Quebec SME: a seller can do everything right on their side and still see the transaction collapse late because the buyer’s economics do not hold.
What many sellers underestimate
When an owner thinks about the sale price, they naturally think about themselves.
About their net vs. gross, their retirement, and their family: that is normal.
But a serious buyer looks at the transaction differently.
They are not only asking: “Do I like this business?”
They are also asking:
- Can I finance this acquisition?
- Will the business cover its debt service?
- Will there still be enough profit to absorb surprises?
- How long to repay the debt?
- How long to recover my down payment?
In other words, a business does not only need to be attractive.
It has to leave enough return for the buyer after debt, surprises, and transition.
Otherwise, the offer may look attractive on paper, but fragile in real life.
The bank’s role
In many transactions, the lender acts as the safeguard.
As serious as the buyer and seller may be, the lender imposes the financial rules — and for a typical Quebec SME, it almost always wants to see a real down payment from the buyer and a solid safety cushion.
Because if the financing does not hold, the transaction is at risk.
The bank does not finance a dream.
It finances repayment capacity.
What it wants to understand is fairly simple:
- how much the business will generate after normalization;
- how much the debt will cost;
- what expenses will need to be added or reviewed after the seller’s departure;
- and how much safety margin will remain once everything is paid.
That is also why seller-side due diligence matters so much: what the buyer discovers or validates during diligence becomes an input for the lender, and any surprise changes the equation.
If the buyer has to pay too much relative to the available profit level, the equation is broken.
And when the equation does not work, one of three scenarios typically occurs:
- the bank pulls out;
- the transaction falls through;
- the buyer renegotiates downward.
In all three cases, the seller is left with a very concrete disappointment. That is exactly the kind of collapse described in the story of a sale that derailed after a year and $50,000 in fees: the financing dynamic shifts, and all the work from the previous months shifts with it.
Managing expectations and the right letter of intent
“If we find the right buyer, they’ll pay.”
Maybe.
But paying — does that involve bank financing?
In a recent file, the defensible value was around $2.7 million.
The seller wanted more.
Our competitive process, conducted among qualified buyers, led to three offers being submitted.
One of the offers exceeded $3 million — what should we do?
The price is better, but will the buyer pass the financing stage?
Worse, will they revise their price downward at the last minute?
Choosing the right buyer does not always mean taking the highest price.
You also have to look at structure, financing, and the real probability of closing.
Are all the offers received realistic?
Will they pass the financing stage?
That logic needs to show up in the letter of intent, not only in the conversations around price.
Knowing the fair market value of your business can help you decide which offer to accept.
A strategic buyer can often absorb a higher price without breaking their financing structure — that is the logic behind prioritizing strategic buyers when their company profile fits.
At this stage, you want to make an informed decision.
Understanding the financing rules that will govern your transaction is valuable.
By knowing the fair market value, you know what financial structure is realistic.
That can make the difference between choosing the winning horse and one that will not finish the race.
A satisfied seller
If you want to increase your chances of closing, one reality is worth accepting early:
The best price is the one that leads to a closed transaction.
Fair market value is often the best indicator of that price.
It can also be used to calculate how much is really left after selling a business — an exercise that turns a gross price into net retirement income.
If the numbers work and you feel ready, the structured business sale process for Quebec SMEs becomes a realistic path.
If there is a gap, it is better to know before choosing an offer that will not make it through financing.
In both cases, you are in control.
Understanding the fair market value of your business allows you to make that kind of decision.
A successful transaction is therefore not only about your price.
It also depends on buyer profitability.
That is good for the continuity of the business you built.
It is also good for your employees, suppliers, and clients, who will benefit from the financially viable context you leave for the buyer.
Good selling.
