The Closing Process: From Signed LOI to Wire Transfer Day

The Closing Process When Selling a Business

You signed the letter of intent. The buyer is committed. Due diligence is wrapping up. The finish line is in sight.

And this is where a surprising number of deals fall apart.

The period between a signed LOI and the actual closing is typically 30-60 days of legal negotiation, third-party approvals, financial true-ups, and transition planning. Most sellers assume the hard part is over once they have a signed LOI. It’s not. The closing process has its own set of challenges, and the sellers who understand what’s coming handle it far better than those who don’t.

Here’s what happens between the LOI and the wire transfer, step by step.

The LOI Is Signed. Now What?

Why the Deal Isn’t Done Yet

A signed LOI means you and the buyer agree on the outline of a deal. The price, the general structure, the timeline. But none of the detailed legal terms have been negotiated yet. The buyer’s financing isn’t finalized. Third parties - landlords, key customers, licensing agencies - haven’t consented to the transfer. And the working capital figure that determines your final check hasn’t been calculated.

Think of the LOI as agreeing on the blueprints. Closing is building the house.

The 30-60 Day Road to Closing

Most deals close within 30-60 days of the signed LOI. Simpler transactions can close in a few weeks; more complex deals with SBA financing or multiple workstreams push toward 60 days. Multiple things happen in parallel:

Weeks 1-2: Due diligence intensifies. The buyer’s accountants and attorneys dig into your financials, contracts, and operations. Both legal teams begin drafting the definitive purchase agreement.

Weeks 2-4: Purchase agreement negotiation. Third-party consents initiated. Buyer’s financing finalized. Quality of earnings analysis wraps up.

Weeks 4-8: Working capital estimated. Final document negotiation. Escrow instructions prepared. Transition planning documented. Closing mechanics arranged.

The biggest risk during this period isn’t that someone finds a dealbreaker. It’s deal fatigue - the slow accumulation of delays, questions, and minor disputes that erodes everyone’s enthusiasm. Keep things moving.

The Definitive Agreement

What’s in the Purchase Agreement

The purchase agreement (also called the definitive agreement or APA/SPA depending on deal structure) is the actual contract that governs the sale. Where the LOI was 5-10 pages, the purchase agreement will be 40-80 pages plus exhibits and schedules.

Your attorney drafts and negotiates this document, but you need to understand its major components because you’ll be making decisions about each one.

The agreement covers: the assets or stock being transferred, the purchase price and how it’s paid, representations and warranties from both parties, indemnification provisions, conditions that must be satisfied before closing, and what happens if either party wants to walk away.

Reps and Warranties (Your Promises to the Buyer)

Representations and warranties are statements you make about your business in the purchase agreement. You’re representing that the financial statements are accurate, that there’s no undisclosed litigation, that you own the intellectual property, that your tax filings are current, and dozens of other specific claims.

These aren’t boilerplate. Every rep is a potential liability. If something you represented turns out to be false - even unintentionally - the buyer can make a claim against you after closing. Your attorney’s job is to negotiate the scope of these reps carefully: qualifying them with “to the seller’s knowledge” where appropriate, limiting them to material items, and setting reasonable survival periods (how long after closing the buyer can make claims).

The practical advice: be thorough and honest during due diligence, because everything you disclose in the DD process gets reflected in the reps. Disclosed issues are priced into the deal. Undisclosed issues become post-closing liabilities.

Indemnification (What Happens If Something Goes Wrong)

Indemnification is the mechanism that determines who pays if a representation turns out to be false or if undisclosed liabilities surface after closing. The purchase agreement will specify: what triggers an indemnification claim, dollar thresholds before claims can be made (called “baskets”), maximum liability caps, and time limits for bringing claims.

Typical indemnification terms for deals in the $1M-$25M range include a basket of 0.5-1% of the purchase price (meaning the buyer absorbs small issues) and a cap of 10-20% of the purchase price. These are negotiable, and the numbers vary by deal.

Escrow Holdbacks (The Insurance Policy)

The buyer will almost certainly require an escrow holdback - a portion of the purchase price (usually 5-15%) that sits with a third-party escrow agent for 12-18 months after closing. If the buyer has a valid indemnification claim, they draw from the escrow rather than suing you.

The escrow is still your money. Assuming no claims are filed, you receive the full amount when the holdback period expires. Negotiate the percentage, the duration, and the specific claim procedures carefully. The goal is reasonable protection for the buyer without tying up an unreasonable amount of your proceeds.

Third-Party Approvals and Consents

Landlord Consent (The Underestimated Risk)

If your business operates from leased space, the lease almost certainly requires landlord consent for a change of ownership. This sounds routine. It often isn’t.

Landlords can use a consent requirement as leverage to renegotiate lease terms, increase rent, or demand a new deposit. Some drag their feet for weeks. A few refuse consent entirely, which can kill a deal if the location is essential to the business.

Start the landlord conversation early - as soon as the LOI is signed. Give yourself time to negotiate if the landlord gets difficult. And review your lease carefully before the deal starts so you know what’s required.

Key Customer and Supplier Notifications

Some contracts with major customers or suppliers include change-of-control provisions that require notification or consent when ownership changes. Review every material contract for these clauses during due diligence.

The timing of customer notifications is sensitive. Tell customers too early and you risk them getting nervous and looking for alternatives. Tell them too late and they feel blindsided. Most sellers coordinate customer communication with the buyer during the week of closing, with a joint message that emphasizes continuity. For a deeper look at how to handle these conversations, see our guide on telling your team and stakeholders.

License and Permit Transfers

Professional licenses, business permits, liquor licenses, health department certifications, franchise agreements - these often can’t simply be transferred to a new owner. Some require new applications. Some require inspections. Some take months to process.

Identify every license and permit your business holds early in the closing process. Determine which ones transfer automatically, which require applications, and which might create delays. Build the timeline around the slowest approval.

Financing Contingencies

If the buyer is using acquisition financing (bank loan, SBA loan), the lender becomes a third party with their own requirements and timeline. Lenders conduct their own due diligence, require their own appraisals, and have their own closing conditions.

SBA loans are common in the $1M-$10M deal range and the full lending process - from application through underwriting, SBA review, and final funding - typically runs 60-90 days. That’s longer than many people expect, and it’s why smart buyers start their lending conversations before the LOI is even signed. If the buyer waits until after the LOI to begin the SBA process, the financing timeline alone can stretch past the closing date.

Conventional bank loans can move faster but come with their own requirements and approval processes. Either way, the buyer’s financing can fall through late in the process for reasons entirely unrelated to your business - the buyer’s personal financial situation changes, the bank adjusts its lending criteria, or the appraisal comes in low.

You can’t eliminate this risk, but you can manage it. Ask about the buyer’s financing status during LOI negotiations - have they been pre-qualified? Is a lender already engaged? Keep backup buyers warm through your broker until the financing is confirmed.

Working Capital and Last-Minute Adjustments

The Working Capital True-Up

Working capital - the difference between current assets (cash, receivables, inventory) and current liabilities (payables, accrued expenses) - is the fuel that keeps the business running day to day. The buyer needs a certain level of working capital in the business on closing day, or they’d have to inject their own cash just to keep the lights on.

The LOI typically sets a target working capital figure based on historical averages. At closing, actual working capital gets calculated and compared to that target. If it’s below target, the purchase price decreases dollar-for-dollar. If it’s above, the price increases. For businesses with significant inventory, this includes a physical count near closing day where obsolete stock and valuation methodology can become negotiation points.

The best protection against last-minute disputes is setting a clear, well-defined working capital target in the LOI with agreed-upon calculation methods. Define what’s included and excluded. Agree on the accounting methodology. The more specific the LOI, the fewer surprises at closing. Your broker and CPA should be actively involved in this calculation throughout the process.

Transition Planning Starts Before Closing

The Transition Services Agreement

Most deals include a transition services agreement (TSA) that defines the seller’s post-closing involvement. This might include 30-90 days of full-time support, followed by a period of on-call availability. Some sellers stay on for 6-12 months in a consulting capacity.

The TSA should spell out: how many hours per week, for how long, what compensation (if any beyond the purchase price), what responsibilities, and what happens if the relationship isn’t working. Negotiate this before closing, not after - once the wire hits, your leverage disappears.

Employee Communication Timing

When do employees find out? This is one of the most stressful decisions in the entire process. Tell them too early and you risk losing key people before the deal closes. Tell them at the last minute and they feel betrayed.

Most sellers tell key managers 1-2 weeks before closing (under NDA) and announce to the broader team on closing day or the day after. The buyer usually wants to meet key employees before closing - these management interviews are part of due diligence, and you’ll need to explain the situation to those employees in advance.

Plan the communication carefully. Your broker can help you think through who needs to know when and how to frame the message.

Customer Handoff Strategy

The buyer needs to maintain customer relationships through the ownership transition. Work with the buyer to create an introduction plan - joint calls, co-signed letters, or in-person meetings with your largest accounts. The first 90 days of new ownership are when customer relationships are most fragile. A smooth handoff protects the earnout (if you have one) and the ongoing value of the business.

Closing Day

What Happens (The Actual Mechanics)

Closing day is more administrative than dramatic. Both parties (or their attorneys) sign a stack of documents - the purchase agreement, bill of sale, assignment agreements, non-compete agreements, transition services agreement, escrow instructions, and various corporate resolutions.

In practice, most of the documents have been reviewed and negotiated in advance. Closing day is the execution, not the negotiation. If your attorney is still negotiating deal terms on closing day, something went wrong earlier in the process.

The Signing, the Wire, the Handshake

The actual sequence: documents are signed (often by both parties on the same day, sometimes staggered), wire instructions are confirmed, and the funds transfer. Wire transfers typically take a few hours to clear, depending on the banks involved.

You’ll know when it hits your account. For most sellers, that moment is oddly anticlimactic. After months of work, thousands of pages of documents, and an emotional rollercoaster, the money just… appears.

Virtual vs. In-Person Closings

Many closings now happen virtually - documents signed electronically, wires initiated remotely. This is practical and efficient, especially when buyers and sellers are in different states.

But some sellers choose an in-person closing. There’s something meaningful about sitting across the table from the buyer, signing the final documents, and shaking hands. If that matters to you, ask for it. Most buyers will accommodate a reasonable request for an in-person closing.

The Emotional Rollercoaster

Relief, Anxiety, Second-Guessing, and Closing Day Nerves

Between the LOI and closing, expect to feel every emotion on the spectrum. Relief that the deal is moving forward. Anxiety about whether it will actually close. Second-guessing whether you’re making the right decision. Sadness about letting go of something you built. Excitement about what’s next.

These feelings aren’t a sign that something is wrong. They’re a sign that this matters to you. Every seller goes through some version of this, including the ones who seem completely composed on the outside.

Stoic Contractors Break Down at the Closing Table

We’ve seen it more times than you’d expect. The toughest, most no-nonsense business owners - the ones who negotiated every term without blinking - sit down at the closing table and get emotional. Sometimes it’s tears. Sometimes it’s just a long pause and a deep breath.

This business was their identity for years or decades. Signing it over to someone else is a bigger moment than any bank balance can capture. There’s nothing wrong with feeling it.

After the Wire Hits

The wire clears. The documents are filed. You’re no longer the owner.

What comes next depends on your transition agreement, your tax planning, and what you want your next chapter to look like. Some sellers dive into consulting. Some take six months off. Some start another business. Some find the adjustment harder than they expected.

A few practical things to handle immediately: confirm the wire with your bank, notify your CPA for tax planning purposes, and begin executing the transition plan with the buyer. The first few weeks after closing set the tone for the entire transition period.

If you’re earlier in the process and want to understand what selling looks like for your specific situation, schedule a free evaluation - no fee, no obligation.

Have questions first? Contact us - we're happy to help.