Selling a small business sounds simple on the surface. You list the business, find a buyer, shake hands, and ride off into the sunset with a check. Easy, right?
Not exactly.
Here’s the truth about most small business sales that nobody tells you—until you’re already knee-deep in the process:
The buyer almost always relies on outside financing.
And it usually comes from a bank.
That single fact changes everything about how your deal will go. It changes the price you can get. It changes the type of buyer you attract. And most importantly, it changes what you need to prepare long before you ever list your business.
Because if the buyer needs bank money to close the deal, then guess what?
The bank is your real buyer.
Until you understand that, selling a business can feel frustrating and confusing. But once you do understand it, the entire process gets clearer. You know what to focus on. You know what to fix. And you know how to position your business so it actually gets financed—and sold.
So let’s get into what really matters.
Why the Bank Matters More Than the Buyer
When a bank is involved, the buyer’s opinion of your business is important—but it isn’t the final word. Even if a buyer absolutely loves your business and wants it badly, they can’t buy it without financing.
And the bank doesn’t care about emotions.
It doesn’t care that your business “has potential.”
It doesn’t care how “hard you worked to build it.”
Banks only care about two numbers. And those two numbers will decide your entire deal.
The Two Numbers That Decide Everything
At the most basic level, banks base their decision on two things:
1. How much the buyer needs to borrow (the purchase price minus the buyer’s down payment)
The higher the price, the bigger the loan.
The bigger the loan, the bigger the risk to the bank.
2. Your historical owner’s cash flow (your SDE—seller’s discretionary earnings)
This is the money your business produces each year for the owner.
Buyers use this cash flow to pay themselves and pay the loan.
Banks use this cash flow to judge risk and determine if the loan makes sense.
If you take nothing else from this article, remember this:
The relationship between the purchase price and the business’s cash flow decides whether the bank will say yes—or slam the door shut.
The Seller Controls Both Numbers (Whether You Realize It or Not)
Here’s the kicker most owners don’t notice:
YOU—the seller—control both numbers.
You choose the price.
You choose how you run the business.
Your bookkeeping affects the cash flow.
Your decisions over the past 3–5 years either help or hurt the bank’s approval.
Most deals fall apart because the seller’s numbers fall outside the bank’s range. And when that happens?
No deal.
This is why preparing your business for sale years before you list it is so important. You can’t just wake up one morning and say, “I think I’ll sell my business.” Not if you want a smooth sale and the best price.
So What Does the Bank Actually Want?
Banks aren’t mysterious. They follow a simple math-driven system.
Here’s what they want:
1. Strong, believable financials
Banks hate messy books.
They hate “estimates.”
They hate when owners mix personal spending with business spending.
If your financials look sloppy, the bank will treat them as risky. And risky deals get denied.
2. Enough cash flow to cover the loan with cushion
Banks run “debt service coverage ratios” (DSCR).
It basically means:
Does the business make enough money to comfortably pay the loan and still have room for surprises?
If the business is barely scraping by, no bank will approve the loan—no matter how great the buyer feels about it.
3. A reasonable purchase price
Banks look at industry multiples.
For most small businesses, banks typically finance deals in the 2x–3x SDE range.
If you price your business at 5x SDE, the buyer won’t be able to borrow enough to make it happen.
4. Clean tax returns and verifiable numbers
Not “creative” numbers.
Not “off-the-books” cash.
Not “add-backs” that only make sense to you.
If the number can’t be proven, banks won’t count it.
What This Means for You as a Seller
If the bank is the real buyer, you need to think like one.
You need to make your business look attractive to them.
This doesn’t mean painting walls or upgrading equipment (although that helps). It means cleaning up your numbers, understanding what they show, and making decisions that support a strong valuation.
Let’s break down what you can do right now to give yourself the best chance of getting bank approval—and a successful sale.
Step 1: Clean Up Your Books
This is the most important thing you can do.
If your bookkeeping is sloppy, incomplete, or mixed with personal expenses, fix it now.
Banks want:
P&Ls and balance sheets for 3+ years
Tax returns that match the P&Ls
Clear explanations of add-backs
Clean, consistent records
If you can’t hand over clean financials, your buyer won’t get financing—and the deal dies.
Step 2: Understand Your True SDE (Cash Flow)
SDE is the seller’s discretionary earnings:
your salary + perks + add-backs + profit.
It’s the money the owner gets from the business.
This number matters because:
Buyers use it to decide value
Banks use it to decide loan approval
Lenders use it to determine DSCR
Do not guess your SDE.
Do not inflate your SDE.
Do not use add-backs that can’t be proven.
A good broker or accountant can help you calculate it correctly.
Step 3: Price Your Business Based on Reality, Not Hope
Many owners price their business emotionally.
But banks don’t finance emotions.
They finance math.
Here’s a simple rule of thumb:
Most small businesses sell for 2x–3x SDE
Only exceptional businesses reach 4x+
And banks rarely, if ever, finance above 3x
If your price is outside the bank’s comfort zone, your pool of buyers disappears.
You’re left hoping for a rare all-cash buyer—which almost never happens.
Step 4: Reduce Risks Before You Sell
Banks hate risk.
Buyers hate risk.
Risk kills deals.
Common red flags:
Customer concentration (one customer = 30%+ of revenue)
No documented processes
Owner-dependent operations
High employee turnover
Declining revenue trends
Old equipment that may require replacement
The more risk you remove, the more likely a bank—and a buyer—will say yes.
Step 5: Show Stability, Not Chaos
Banks want boring businesses.
Crazy growth looks risky.
Wild swings in revenue look risky.
A sudden drop in profit looks risky.
Seasonal businesses look risky unless well-documented.
If your numbers bounce around, buyers struggle to project the future—and banks get nervous.
Consistency is gold.
Step 6: Keep Your Ego Out of It
Many business owners love their business so much that they think it’s worth more than the market says.
But here’s the thing:
The business is worth whatever a bank will finance and a buyer will pay—not what it’s worth in your heart.
You might have built it from scratch.
You might have sacrificed years of your life.
You might feel like it’s your legacy.
But the bank sees only numbers.
And those numbers don’t lie.
Why So Many Deals Fall Apart
Most deals blow up for one reason:
The numbers don’t support the price.
You may think your business is worth $1 million.
The bank may think it’s worth $600k.
The buyer may have only $100k to put down.
That gap kills deals every day.
Owners often blame the buyer or the broker—but it’s almost always the numbers.
What Smart Owners Do Years Before Selling
Owners who sell successfully don’t just wake up one morning and list their business. They start preparing early—2, 3, even 5 years before they plan to sell.
Here’s what they do:
Clean up financials
Remove personal expenses
Increase margins
Build a management team
Document processes
Reduce customer concentration
Improve marketing and sales consistency
Show steady growth
Pay themselves a market-rate salary
Keep tax returns clean
All of this creates a business that banks love.
And buyers fight over.
What Happens When You Don’t Prepare
If you don’t prepare:
Buyers doubt your numbers
Banks deny the loan
Offers come in low
Deals drag out
Due diligence becomes painful
The sale may fall apart completely
This leads to frustration.
Owners get burned out.
Businesses start declining.
Some owners even end up taking far less than they wanted—or closing the business entirely.
Preparation is not optional.
It’s the difference between a great exit and a disappointing one.
The Hidden Secret: You Don’t Need Hundreds of Buyers—Just One Bank-Approved Buyer
Many owners worry about finding the “perfect buyer.”
But the real goal is simpler:
Find one buyer who fits the business and one bank that will approve the loan.
That’s it.
You don’t need 50 buyers.
You don’t need a bidding war.
You need one real buyer with one real approval.
This is why prepping your numbers is more important than anything else.
Final Thoughts: The Bank Is Your Real Audience
When you’re ready to sell, remember:
You’re not selling to the buyer’s emotions
You’re selling to the bank’s math
Clean numbers beat big stories
Good bookkeeping beats “potential”
And strong cash flow beats everything
If your deal survives the bank’s filter, you have a sale.
If it doesn’t—no amount of charm or negotiation will save it.
So start now.
Clean up your numbers.
Strengthen your cash flow.
Price realistically.
Reduce risk.
And think like a bank.
Do that, and you’ll not only sell your business—you’ll get the best deal possible.
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Hi, I’m Heather.
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