Buying a Business? Negotiate the Working-Capital Peg Before the Loan

Separate the purchase price from the operating handover

A business can be profitable and still require cash immediately after a sale. Payroll may be due before acquired invoices are collected, suppliers may change terms and stock may need replenishing. Acquisition financing should account for that transition instead of assuming that the purchase price includes every operating resource the buyer needs.

A working-capital peg is a negotiated target used to define the normal level of operating working capital delivered at closing. The agreement determines which assets and liabilities count. It is not automatically the same as every current asset minus every current liability on the balance sheet.

Define the included accounts precisely

Receivables, usable inventory and ordinary trade payables often receive detailed attention, but cash, debt, taxes, customer deposits and deferred revenue can be treated differently from one transaction to another. An accountant and transaction attorney should establish definitions that are consistent with the price mechanism and the operating model.

Review aged receivables and obsolete stock rather than accepting gross balances. A customer deposit brings cash but can also bring an obligation to provide goods or services. Counting the cash without the corresponding obligation can overstate the working capital being transferred.

Understand a closing adjustment example

Suppose the agreed peg is $150,000 and measured working capital at closing is $120,000 under the contract’s definitions. An agreement with a dollar-for-dollar adjustment would reduce the price by $30,000. That is only an example: actual agreements can use different measurement dates, thresholds, dispute procedures and true-up mechanisms.

A price reduction does not necessarily solve the day-one liquidity problem. The buyer may still need cash to fund payroll while resolving a post-closing adjustment. Ask the financing provider when proceeds can be used and whether a reserve is required or permitted.

Normalize the target for the business

A seasonal business should not set its target solely from its quietest month. Review monthly balances over a representative period, then identify growth, unusual collection events and changes in supplier terms. Increasing revenue can require more operating capital even if the seller’s historical ratios look stable.

Also normalize owner wages, related-party expenses and replacement management costs in repayment analysis. Seller discretionary earnings, accounting profit and cash available to the buyer after debt service are different measures.

Coordinate the lender and transaction advisers

An SBA or conventional acquisition proposal must be consistent with the purchase agreement, valuation, equity contribution and uses of proceeds. Share revisions early. Ask which closing adjustments change the lender’s approval and whether additional working capital requires separate underwriting.

Build a cash forecast for the first thirteen weeks after closing. Use it to test the handover, initial collections, supplier payments and first loan installment. The objective is to buy a functioning business with adequate liquidity, not merely to close at the advertised purchase price.

Explore related funding options

Compare sba loans, business term loans, working capital through Let’s Syndicate. Match the repayment structure to your actual use of funds and request written terms before deciding. Product availability, eligibility, collateral and costs depend on the provider and transaction.

Sources and important limitations

SBA 7(a) eligible uses include qualifying changes of ownership and working capital. Purchase-agreement terms require transaction-specific legal and accounting advice.

Prepared October 1, 2026 by the Let’s Syndicate Editorial Team. Educational information only, not individualized financial, legal, investment or tax advice. Illustrative calculations exclude any costs not expressly stated and are not financing offers. Consult qualified advisers and the applicable agreement before acting.

Illustrative editorial photograph from Unsplash; no named lender, customer or financed transaction is depicted.