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The Deal or the Money: Which Should Come First?

Cash is king. Money talks. Take the cash. These expressions are ingrained in our minds and influence our business decisions. After all, when it comes to selling a business, the seller is often well advised that when presented with two similar offers, they should opt for the cash offer over one from a buyer who needs to secure financing. However, when presented with such an option, the choice is not always that easy for several reasons:

  • Good buyers are hard to find, and when you are selling a highly valued business, the buyer pool shrinks considerably (almost exponentially, it seems).
  • A good deal is rarely just about the money. As I point out in a previous post, “Top 5 Do’s When Negotiating the Sale of an Auto Dealership,” getting top dollar for your business is certainly a key consideration, but you may also want to consider your legacy in the industry and in the community, the future wellbeing of your employees, and whether the new owners will continue to run the business according to a certain set of principles or core values.
  • You cannot always judge a buyer by the amount of cash that buyer has on hand. A great prospect may need or want to finance all or a portion of the deal for any number of reasons, including the possibility that the person’s cash is tied up in other very successful ventures.
  • The fear, distrust, and uncertainty that surround non-cash offers can cloud a buyer’s judgment and derail the offer that holds the greatest potential upside for all parties involved.

The key to evaluating offers is to ask the right questions. Instead of asking whether a prospective buyer has the cash on hand to purchase the business, consider all the terms of all offers and ask how likely it is that the buyer you want to sell to can secure the necessary financing.

Defining “Financially Able to Perform”

I have seen many initial negotiations become tense very quickly because the buyer and seller have different definitions of what “financially able to perform” means. To some people, “financially able to perform” means the cash is readily available and waiting to be deployed, literally at the snap of a finger. To others, it means the buyer has the ability to obtain the necessary equity or debt through a process that has been followed time and time again. The money may not be in the bank, but the individual has been through enough transactions and has solid relationships to obtain the needed funds in short order so long as the potential transaction meets certain parameters (usually fleshed out in diligence review).

Merely understanding the difference in definitions is not enough to provide comfort when definitions differ, but it is a good starting point. If definitions differ, knowing the source of the disconnect can enable the parties to continue the discussion.

Vetting Non-Cash Buyers

The next steps in dealing with a non-cash buyer are to ask questions about the individual, probe their history of deals completed, and develop a deeper understanding of the money raising process of the person or organization. This last step may include checking references on the buyer’s previous deals, obtaining details from the buyer about whether the funds are from a new source or one that has done deals with the buyer in the past, and gaining a deeper understanding of the buyer’s deal team (whether they have competent advisors and consultants, which would demonstrate that they understand the industry and are prepared to assume ownership).

These are the core takeaways:

  • If you are a seller, avoid the temptation to automatically dismiss prospective buyers merely because they need to finance all or a portion of the purchase. Consider the offer as a whole and carefully vet prospective buyers to narrow the field to only those candidates that you are reasonably confident can perform financially.
  • As a buyer, if you have ready cash, use it to diffuse the issue entirely. If cash is not readily available, then be prepared to present a strong financial picture, proving your ability to complete the transaction. Do not assume that the seller understands how you operate or has an in depth understanding of private capital and debt markets.

Remember, any fear you have going into a deal can be conquered by knowledge. Fear is often a product of a lack of knowledge or information. Ask questions until you feel confident one way or the other — confident moving forward or confident backing out. Do not let fear undermine what might otherwise become the deal of a lifetime.


Disclaimer: The information in this blog post is provided for general informational purposes only, and may not reflect the current law in your jurisdiction. No information contained in this post should be construed as legal advice from Stephen Dietrich, nor is it intended to be a substitute for legal counsel on any subject matter. No reader of this post should act or refrain from acting on the basis of any information included in, or accessible through, this Post without seeking the appropriate legal or other professional advice on the particular facts and circumstances at issue from a lawyer licensed in the recipient’s state, country or other appropriate licensing jurisdiction.


About the Author: Stephen Dietrich is an attorney and author who has a passionate interest in the human side of business. His distinctive combination of legal and business knowledge, human insight, and dedication to clients makes him uniquely qualified to help corporate leaders and other C-level executives navigate high-value mergers and acquisitions, restructure transactions, and manage day-to-day operations. Through this blog, Stephen shares his extensive experience and unique personal and professional insights in the hope of stirring thought and dialogue that leads to ever deepening insights and understanding. For more information, please visit

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