Are inventory and receivables included when you buy a business?

What does the asking price usually include on a Main Street deal?

Most businesses under about $1M of earnings are priced as a multiple of seller's discretionary earnings (SDE). That multiple prices the earnings stream and the assets needed to produce it. It usually does not price the cash needed to run the business day to day.

• Usually included: furniture, fixtures and equipment; vehicles if listed; the trade name, phone numbers, website and customer lists; transferable licenses; goodwill.
• Inventory: either included up to a stated amount, or priced separately as "plus inventory at cost," counted at closing. Ask which. Listings are often unclear.
• Usually excluded: cash in the bank, accounts receivable, the seller's debts and accounts payable. The seller collects what customers owe for work done before closing and pays its own bills.
• Usually separate: real estate the seller owns. It is bought under its own agreement or leased to you.

For scale, BizBuySell data put the median sale price at $350K and the median cash flow at $165K. At that size, the cash-free, receivables-excluded structure is the default.

What changes in larger deals?

Above roughly $1M of earnings, buyers switch to EBITDA, which treats the owner's salary as a cost, and multiples rise. Deals at that size are usually cash-free and debt-free with a working capital target. The seller keeps the cash and pays off debt. The business is delivered with a normal level of receivables and inventory, net of payables. If closing working capital lands above or below the target, the price moves dollar for dollar. That target is called a peg. See what a working capital peg is.

How should you handle inventory?

• Count it at closing. Do a physical count the day before or the day of closing, with both sides present or a third-party counter.
• Value it at the seller's cost. Not retail and not replacement cost.
• Exclude what you can't sell. Obsolete, damaged, expired and slow-moving stock should be excluded or written down.
• Set a range. Agree a minimum and maximum inventory level. You need enough to operate. You don't want to pay for a warehouse of stock you'll sell over years.
• Check it against the numbers. Compare inventory to cost of goods sold. A business that turns stock slowly ties up your cash.

What about receivables and customer deposits?

If the seller keeps receivables, you start with no money coming in from past work. You pay payroll and suppliers for weeks before your first customer invoices are paid. Agree how payments that land in your account for the seller's invoices will be passed back, and how fast.

If you buy receivables, buy only collectible ones. Exclude invoices past an agreed age. Get a right to put back, or offset, any that don't pay.

Watch for customer deposits and prepaid work. If customers paid the seller for work you will perform after closing, you carry the cost and the seller kept the cash. You should get a credit at closing for that amount.

If you are using an SBA loan

As of October 2026, the SBA equity injection is at least 10% of total project costs. Total project costs are the purchase price plus working capital plus fees and closing costs. So working capital is not a side issue. It raises the injection you must bring.

• The lender can include working capital and inventory in the loan. Ask early, because it changes the debt service the business must cover.
• Every change-of-ownership loan needs an independent business valuation. Total debt is capped at the appraised value. Any gap between price and valuation comes from buyer cash.
• Seller notes on full standby, other standby debt and passive minority investors holding under 20% in aggregate can together cover no more than half of the required injection. The rest is your cash.

Worked example: a service business where the seller keeps receivables

Illustrative figures.

• Purchase price: $900,000. Seller keeps cash and receivables.
• Monthly operating costs, including payroll: $120,000. Customers pay in about 45 days.
• Cash you need before collections catch up: $120,000 × 1.5 months = $180,000 of working capital.
• Fees and closing costs: $45,000.
• Total project costs: $900,000 + $180,000 + $45,000 = $1,125,000.
• Minimum SBA injection: 10% × $1,125,000 = $112,500.
• Most that seller notes on full standby and small passive investors can cover: half, or $56,250. At least $56,250 must be your own cash.

If the buyer had forgotten working capital, the project would have looked like $945,000, and the injection like $94,500. The business would then run short of cash in month one.

Where these numbers come from: SDE multiples, the median sale price and cash flow, and the switch to EBITDA above about $1M of earnings are from BizBuySell data summarized by Beancount's SDE multiples guide. The equity injection, total project costs, the half cap on limited sources and the valuation cap are from SBA SOP 50 10 8.1, summarized by Beancount's SOP 50 10 8.1 guide and Starfield & Smith on equity injection. Confirm current requirements with your lender. 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

Is inventory included in the SDE multiple?

Sometimes. Some listings quote a price that includes normal inventory. Others quote the price "plus inventory." Ask the broker in writing and put the answer in the letter of intent.

Who gets the cash in the bank at closing?

The seller, in almost every small-business sale. You fund your own opening cash. That is why working capital belongs in your sources and uses.

What if the seller wants to keep receivables and I need the cash?

Offer to buy the collectible receivables at face value with a put-back right, or add the amount to working capital in your loan request. Both cost money. Choose the one that keeps your debt service coverage intact.

Are customer deposits part of the deal?

They should be. Deposits are cash the seller received for work you will do. Ask for a dollar-for-dollar credit at closing.

What comes next

In larger deals the inventory and receivables question becomes one number, the target level of working capital: what is a working capital peg?

Related articles

• Asset purchase or stock purchase: which should a buyer choose?
• What is a working capital peg?
• Does the asking price include inventory, receivables and working capital?
• How much cash do I need to buy a business?
• 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.