A process that reaches the finish line and dies on financing has usually been broken since the first week. The problems that kill it are visible early, cheap to fix early, and expensive to discover during exclusivity. Running a short capital-readiness triage before the teaser goes out is the least glamorous work an advisor does and the highest-yield.
What is capital readiness?
Capital readiness is the state in which a company’s financial records, collateral, liens, and debt structure can survive third-party financing diligence without a repricing or a delay. It is not the same as being a good business. Profitable companies routinely fail it, and the failure surfaces at the worst possible moment.
For a sell-side advisor it determines whether the buyer’s lender funds on schedule. For a buy-side advisor it determines whether your client’s offer is credible at all.
Why does this belong before the process, not during it?
Because every fix takes calendar time that exclusivity does not give you. A stale lien termination takes weeks to chase. A quality-of-earnings issue takes a full re-analysis. A debt schedule reconciliation takes a week of accounting time nobody has in month two of a process.
Discovered early, each of these is administrative. Discovered late, each is a price negotiation.
The eight-item triage
| # | Check | What failure looks like |
|---|---|---|
| 1 | Lien search on the exact legal name and former names | Filings with no matching debt, blocking a first lien |
| 2 | Debt schedule reconciled to the balance sheet | Undisclosed leases or advances found in diligence |
| 3 | Receivables ageing and concentration | One customer that caps the whole facility |
| 4 | Addback support, documented not asserted | EBITDA restated downward mid-process |
| 5 | Working capital by month, 24 months | A peg negotiation the seller loses |
| 6 | Quality of monthly close and cut-off | Diligence extends by 30 days |
| 7 | Equipment appraisal basis | Collateral worth a third of what the schedule says |
| 8 | Change-of-control and consent provisions | A landlord or customer with a veto nobody priced |
Each of these has a fuller treatment on this site: UCC filing meaning, business debt schedule, customer concentration, addbacks that survive diligence, the working capital peg, quality of earnings, and forced liquidation value.
What does this change on the sell side?
Two things. First, a seller who can answer the buyer’s lender’s questions in week one shortens the financing contingency, which is worth real money in a competitive process. Second, and less obvious, addbacks that are documented before the process starts survive better than addbacks defended under pressure, because the documentation predates the incentive to create it.
The seller who cleans up in advance is not hiding anything. They are removing the ambiguity a buyer would otherwise price.
What does this change on the buy side?
It tells you what the deal can actually carry before your client signs an LOI on a number. A buy-side advisor who has run the collateral math knows whether the senior facility covers the purchase price or leaves a gap, and whether that gap is a seller note, a subordinated layer, or a bridge.
The gap is the part that kills deals quietly, and it is covered in the two weeks that kill acquisitions and seller notes, earnouts, and rollover equity.
What if the triage fails?
Failing is useful information, delivered early. Most failures fall into three groups.
- Fixable in weeks. Lien terminations, debt schedule reconciliation, a missing appraisal. Do them before launching.
- Fixable in a quarter or two. Concentration reduction, monthly close discipline, documented addbacks. This is the argument for delaying a launch by one quarter rather than repricing in month five.
- Structural. The business cannot support the leverage the price implies. Better to know before the market sees the book.
Who should run it?
Whoever will be blamed for the delay. In practice that is the advisor, because the client’s accountant is not looking at lien records and the client’s lawyer is not looking at borrowing base eligibility. The triage sits between the two disciplines, which is exactly why it goes unrun.
The short version
Financing problems in a process are almost never discovered late. They are noticed late. An eight-item triage before launch turns the expensive version of each problem into the cheap version, and it is the difference between a financing contingency that closes on schedule and one that becomes a second negotiation.