Commercial Deal Financials

3 Replies

Hello everyone!

I am in the process of my first commercial deal and need a little help, please.

My mentor helped me run the financials based off of what the seller is claiming is the monthly cash flow. However, we want proof to be sure because the numbers just dont add up.

I have requested the past 2 years financials but the seller has asked I show approval from the banks that I'm cleared to buy before they release financials.

This is where I'm confused. Should I get cleared for financials for this deal and every commercial deal before asking for numbers in the future?

This deal doesn't look fantastic numbers wise and I dont want to fill out mounds of paperwork just to see bad financials.

@Patrick Hughes some sellers like to see proof of funds or a pre-qualification letter (not a term sheet) especially if you do not have a portfolio or track record. You should be able to get one from your lender with little to no paperwork.

All you need to do for pre-qual is submit general deal info and your financials to the lender which you should have on hand in dígital form ready to email at any time.

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Historical Financials are typically provided during the DD phase and not in the prelim stage. At that stage, you work off the OM and the in place financials the seller/broker has provided. Some sellers do like to see a LOI and that your qualified to purchase before providing historicals. Get a one page term sheet from a lender. Its non binding for the lender and you get to use the DD period to decide if you want to back out of the purchase.