David C Barnett Small Business and Deal Making M&A SMB

When Business Sale Proceeds Don’t Cover the Debt (What Happens Next?)

Feb 25, 2026
They walk through what happens when a business sale leaves secured lenders unpaid and closing funds fall short. You hear numeric scenarios of valuation decline, debt priorities, and closing shortfalls. Creative workarounds are explored, including deal reformatting, creditor negotiations, seller financing splits, broker advances, and real-world lending to buyers.
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INSIGHT

When Secured Debt Eats Closing Proceeds

  • Closing proceeds can be swallowed by secured debt so little or nothing remains for commissions and fees.
  • David C Barnett illustrates a $950,000 sale with $900,000 secured debt leaving only $50,000 to cover broker and legal costs.
ANECDOTE

Daycare Sale Blocked By High Mortgage

  • David recounts selling a struggling daycare with high mortgage where the building's value was offset by heavy secured debt.
  • The property's high mortgage left little transferable equity, creating a closing shortfall and a difficult sell-side choice.
ADVICE

Avoid Forcing Buyers To Raise Price For Fees

  • Reformat the deal to increase the purchase price only if the buyer agrees and it's justified by added value.
  • David warns buyers usually won't pay more just to cover the seller's broker commission, so expect resistance.
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