Ask the buyer to map the purchase price and expected closing costs to specific funding sources, then request evidence for each source. Separate cash that is already available from equity that still needs approval, debt that is committed from debt that is only being explored, and a lender's commitment from the conditions that could prevent funding. Confirm who can authorize the purchase, what approvals remain, how diligence could change the financing, and what happens if a source falls away. Review the evidence with qualified transaction counsel and financial advisers because the meaning of a commitment, proof of funds, and financing contingency depends on the documents and applicable law. Treat every response as a dated snapshot, not a guarantee that the deal will close.
Start with a funding map, not a reassuring label
A buyer may describe an offer as fully funded, cash backed, or supported by committed capital. Those labels are not enough to evaluate execution risk. Ask for a simple sources-and-uses schedule that ties the proposed consideration and known transaction expenses to named sources. The schedule should identify the amount expected from buyer cash, sponsor or investor equity, acquisition debt, seller financing, rollover equity, or any other source. Ask the buyer to identify which amounts are available now, which require a new approval, and which depend on another event.
The purpose is not to demand every confidential lender document at the first conversation. It is to make the funding dependency visible. A buyer that cannot explain the path from source to closing may have an attractive headline offer but an unresolved funding problem. A buyer that can explain the path should still be tested against the actual terms, conditions, expiration dates, and approval authority in its supporting documents.
Separate available equity from equity that still needs approval
Available equity can mean several different things. It may be cash already held by the buyer, capital committed by an investment fund, money promised by co-investors, or a contribution that depends on an investment committee or board decision. Ask which category applies to each stated amount and request evidence that matches it. For existing cash, that may be a dated confirmation or other appropriately redacted evidence reviewed through a controlled process. For sponsor or investor capital, it may be an executed equity commitment, governing approval, or written confirmation that identifies the commitment and its conditions.
Ask whether the equity source can be reduced, withdrawn, redirected, or conditioned on diligence findings, financing terms, or a return threshold. Also ask whether the amount covers only the purchase price or includes fees, required minimum cash, debt repayment, working-capital needs, and any funding required after closing. The buyer should explain who has authority to approve the final amount and what approvals remain. Do not treat a capitalization presentation, indication of interest, or informal statement of intent as proof that the money is available.
Read a financing commitment for conditions, not just dollars
If debt is part of the plan, request a summary of the lender, facility type, committed amount, expiration, material conditions, and the steps required before funding. A commitment letter can be useful evidence, but its practical value depends on its defined financing conditions and the relationship between those conditions and the purchase agreement. One SEC-filed merger agreement, for example, separately defined a debt commitment letter and financing conditions, then addressed whether the debt and other immediately available funds would cover specified closing payments. [1] That illustrates a diligence question, not a universal drafting standard.
Ask whether the financing is subject to completion of diligence, delivery of definitive documents, acceptable financial statements, minimum performance, collateral, third-party consents, regulatory clearance, or no material adverse change. Ask whether the lender can syndicate, amend, withdraw, or refuse to fund after a condition is tested. The seller should have counsel compare the financing conditions with the buyer's proposed financing contingency and closing conditions. A commitment for a stated amount is not the same as unconditional cash at closing.
Test the gap between proof of funds and closing certainty
Proof of funds answers a narrow question: what evidence supports the existence or availability of money at a particular time? It does not by itself answer whether the buyer has authority to use the money, whether the amount is sufficient after fees and adjustments, or whether a lender can decline to fund. A buyer may also show cash that is earmarked for another purpose or present a commitment whose conditions have not been satisfied. Ask for the date, holder, currency, permitted use, and any restriction attached to each item of evidence.
A filed merger agreement can show the distinction clearly. In one agreement, the buyer represented financial capacity and separately addressed debt commitments and financing cooperation. [2] In another, the buyer delivered an executed debt commitment letter, identified financing conditions, and represented that debt, cash, available credit, and other immediately available funds would cover the required amount, subject to the agreement's assumptions and conditions. [1] These are negotiated facts about those transactions, not evidence that any other buyer is funded.
Ask who has approved the purchase and what can still change
Funding can fail because the money is unavailable, but it can also fail because the buyer has not completed its internal authorization process. Ask whether the buyer's board, investment committee, partners, lenders, co-investors, or parent company have approved the specific transaction, rather than a general strategy or target range. Ask what price, structure, diligence, or financing changes would require a new approval. Record the answer and the date so that later changes can be compared with the original offer.
The FTC's guide for Commission-ordered divestitures is not a rule for ordinary private sales, but it provides a useful example of the questions a formal reviewer may ask. It says buyers may be expected to explain funding structure and limitations, identify all financing sources, explain how the buyer and financial entities evaluated and authorized the purchase, and provide supporting financial and business plans. [3] A private seller can use the same categories as a checklist while recognizing that the applicable process and legal rights vary by transaction.
Turn the review into conditions for exclusivity
Exclusivity changes the seller's alternatives, so funding review should happen before the seller gives up competitive leverage. The seller can ask the buyer to deliver a dated funding package, identify unresolved conditions, and update the package when a material assumption changes. The parties can discuss whether exclusivity depends on evidence of specified equity, a satisfactory debt commitment, internal approval, or another agreed milestone. Counsel should draft any condition, reporting obligation, termination right, deposit, reverse termination remedy, or financing contingency because the effect depends on the transaction documents and governing law.
Use stopping conditions rather than open-ended reassurance. For example, pause a move to exclusivity if the buyer cannot identify a source for the full required amount, if a key approval has no defined decision path, if financing conditions are broader than the buyer's explanation, or if the funding evidence is stale. Do not infer bad faith from an unresolved item. Ask the buyer to resolve it or explain why it does not affect the closing plan.
Protect confidential information while verifying the evidence
Funding evidence can contain bank details, investor identities, credit terms, and sensitive personal or business information. Define who may receive it, what can be redacted, where it will be stored, and when it will be deleted or returned. A seller can ask for a lender or adviser confirmation that verifies the relevant fact without circulating an entire private file. Keep a source register that records what was reviewed, by whom, on what date, and what limitation remains.
A practical human review assigns one accountable owner to compare the sources-and-uses schedule, proof of funds, equity evidence, financing summary, approval record, and proposed purchase agreement. That reviewer should flag mismatched amounts, dates, entities, currencies, conditions, and expiration dates. Software can organize the checklist and surface missing fields, but a human should decide whether the evidence is sufficient and what information may be disclosed.
Use a documented decision, not a binary funding score
The result of this work should be a short decision record. Classify each source as available, committed subject to stated conditions, proposed, or unverified. List the amount, evidence date, conditions, approval owner, expiration, and next verification step. Then record the remaining dependencies that could prevent signing or closing. This is more useful than labeling the buyer simply funded or unfunded because it shows where the seller still depends on the buyer, lender, investor, regulator, or another third party.
Acquivo is a software platform that delivers the entire sell-side M&A process, valuation, marketing materials, buyer matching, and deal management, on one platform for business owners, M&A attorneys, and boutique investment banks. Acquivo gives business owners the entire sell-side process an investment bank would run, as software, with no success fee. The software is user-operated, so the owner and its advisers remain responsible for source review, permissions, decisions, and communications.
Key Points
- Build a sources-and-uses map that names every proposed funding source and distinguishes money available now from money needing approval.
- Treat a debt commitment as evidence with conditions, dates, and funding mechanics, not as an unconditional promise to close.
- Ask who approved the specific purchase and what changes would trigger a new internal or lender approval.
- Review funding evidence before granting exclusivity and define stopping conditions for unresolved dependencies.
- Record evidence dates, limitations, permissions, and human review decisions without circulating unnecessary confidential information.
Sources and references
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Educational information, not individual legal, tax, or investment advice. Consult qualified professionals for your circumstances. Acquivo provides software, not representation or negotiation on your behalf.