Why won't the broker share financials before an LOI?

What does a broker normally share, and when?

Main Street sales usually release information in stages. Each stage asks a little more of you and gives a little more back.

1. Before an NDA: the teaser. Industry, region, asking price, a cash-flow figure and a few lines of description. No company name.
2. After an NDA and a buyer profile: the package. Often called a confidential information memorandum. It usually includes a recast of seller's discretionary earnings (SDE) with add-backs, summary profit and loss for recent years, and a description of staff, customers and premises. Some brokers include tax returns here; others release them after a buyer call.
3. After a meeting with the owner: follow-up answers. More detail on add-backs, customer mix in anonymous form, the lease and key employees.
4. After a signed LOI: due diligence. Bank statements, full tax returns, payroll records, customer and supplier contracts, the lease, licenses, and point-of-sale or job-system data. Diligence typically takes 30 to 60 days, inside an exclusivity period of typically 30 to 90 days.

Why do brokers hold back the rest?

• Confidentiality. If employees, customers or competitors learn a business is for sale, staff leave and customers hedge. The seller bears that cost whether or not you buy.
• Competitors fishing. Some inquiries come from rivals who want pricing, margins and customer names. Brokers cannot always tell who is real.
• The seller's time. Pulling bank statements and contracts takes hours from an owner who is still running the business. Brokers save that work for a buyer who has committed on price and terms.
• Their own time. The broker is paid only at closing, by the seller. Releasing everything to every inquiry costs them hours on buyers who will not close.

What is a red flag?

Holding back records is normal. Holding back the numbers you need to make an offer is not. Be wary when:

• No profit and loss or tax-return figures are available at any stage before the LOI, only a single SDE number.
• The add-backs are large and unexplained, or the broker cannot say what they are.
• The recast earnings do not reconcile to the tax returns, and no one will explain the difference. See unreported cash income.
• The broker pushes for a signed LOI within days, with a large nonrefundable deposit or a long exclusivity period.
• The seller refuses to provide tax returns even after an LOI. An SBA lender will require them, so the deal cannot be financed that way without them.
• The LOI they want you to sign has no diligence or financing contingency.

Any one of these may have an innocent explanation. Ask for it in writing. If the answer does not come, walk away.

How do you protect yourself when you sign an LOI on limited information?

Write the protection into the LOI. Most of a typical LOI is non-binding, and the protections that matter are contingencies that let you withdraw. Confirm the specifics with your lawyer.

• Due diligence contingency. The price assumes the financials hold up. If they do not, you can renegotiate or walk.
• Financing contingency. Closing depends on an SBA loan approved on terms you can accept, including the independent valuation. Total SBA debt is capped at the appraised value.
• Price tied to stated earnings. State the SDE or cash flow your price is based on, so any shortfall found in diligence is a documented reason to adjust.
• Reasonable exclusivity. Long enough for diligence and lender approval, not open-ended.

See what an LOI should include and whether an LOI is binding.

If you already own a business in the same industry

Expect brokers to be more guarded with you, not less. You are the buyer most able to use the information against the seller. Offer a tighter NDA, agree to non-solicitation of staff and customers, and suggest that sensitive data such as customer names be shared with your accountant or lawyer first.

Worked example: testing a price on summary numbers before the LOI

A package shows SDE of $290,000 last year and $310,000 the year before. The asking price is $1,000,000. Other inputs are illustrative.

1. Average SDE over two years: $300,000. A lender will use the last fiscal year or this two-year average.
2. Project cost: $1,000,000 plus an assumed $60,000 of working capital, fees and closing costs = $1,060,000.
3. Minimum equity injection: 10% = $106,000. Loan: $954,000.
4. Annual payments at 10% over 10 years (prime of 7% plus 3%, as of September 2026; check current prime): about $151,000.
5. Cash flow after an assumed $100,000 salary: $200,000 on the average, or $190,000 on last year alone.
6. Coverage: $200,000 ÷ $151,000 = 1.32x, or $190,000 ÷ $151,000 = 1.26x. Both clear 1.25x, barely.
7. If diligence removes $20,000 of add-backs, coverage on last year falls to $170,000 ÷ $151,000 = 1.13x. The loan fails at this price.

That is enough to decide whether to write an LOI, and to know which add-backs your diligence must test first.

Where these numbers come from: due diligence and exclusivity periods are from BizBuySell and BigIdeasDB. Coverage, injection and valuation rules are from SBA SOP 50 10 8.1, summarized by Beancount and Cantrell Firm. Rates are from NerdWallet. SOP 50 10 8.1 applies to loans that receive an SBA loan number on or after October 1, 2026 (SBA Information Notice 5000-880695).

Related questions

Should I ask for tax returns before the LOI?

Yes, at least the business returns for the last two years, because those are the years a lender will use. If the broker will only share them after the LOI, make your price conditional on them matching the package.

Can I ask for bank statements before an LOI?

You can ask, and some sellers agree. Do not insist on a full set before you have agreed on price. Use them in diligence to tie deposits to reported revenue.

Is a deposit normal when signing an LOI?

Some brokers ask for one. Before you pay any deposit, have your lawyer confirm when it is refundable, especially if diligence or financing fails.

What if the financials are fine but the broker still stalls?

The seller may not be ready, or may be talking to another buyer. Ask directly where things stand, give a date for your offer, and keep other deals moving.

What comes next

Once you can see the numbers, the next question is how much cash you need to buy a business. If you intend to buy more than one company, insist on clean, reconcilable numbers from the first deal on, because a holding company is valued, financed and possibly listed on books an auditor can work with.

Related articles

• How do you get business brokers to take you seriously?
• Do I need a business broker to buy a business?
• What do you do when a seller won't share financials?
• How do you verify that a seller's numbers are real?
• How do you build a holding company for acquisitions?

Meraki Dealmakers is a service of Meraki Partners, LLC, an advisory firm. It is not a broker-dealer, investment adviser, business broker, law firm or accounting firm. This article is general information, not legal, tax or investment advice.