What Happens if the Deal Changes After the Finance Application Has Been Submitted?
Updated: 1 day ago
Material deal changes after a finance application has been submitted should be disclosed promptly, because the lender needs to assess the acquisition you now intend to complete.
The application is away, but the negotiations are still moving. Perhaps the vendor has accepted a lower price, offered to leave money in the transaction or shortened the handover.
What looks like progress around the negotiating table can also change the proposal sitting with the lender.
For an Australian accounting-practice buyer, the useful question is how the new arrangement affects funding, repayment capacity and the transition. Tell your acquisition finance adviser what has changed so those connections can be considered before you rely on the earlier position.
Deal changes: the short answer
Tell your acquisition finance adviser promptly about material changes, including proposals still being negotiated.
Explain the old arrangement, the new arrangement and whether the change is agreed.
Update the funding requirement, forecast and supporting documents where affected.
Ask whether further assessment, revised conditions or new documentation is needed.
You should keep contractual deadlines under review with your solicitor, because reassessment does not extend them automatically.
Why does the original application need attention?
A finance submission connects several pieces of a transaction. Financial information helps demonstrate repayment capacity, while contracts, forecasts and business plans may help explain the proposed purchase. The requirements for your application depend on the facility and circumstances.
When one of those pieces changes, others may need updating.
A different price affects the funding calculation. A shorter vendor transition may alter staffing costs. A different buyer entity may change who borrows and provides security. The original submission can become incomplete without any single document looking obviously wrong.
A lower purchase price does not answer every funding question
A price reduction may reduce the amount payable, but its reason matters. If the vendor has simply conceded during negotiations, the operating forecast might remain unchanged. If the reduction follows the loss of a major client, the forecast may also need lower revenue and a different view of repayment capacity.
You should also explain how the revised price will be funded. Are you requesting a smaller loan, preserving more cash for working capital or changing your contribution? None should be assumed from the price alone.
Reconcile the revised purchase amount with acquisition costs, available funds and cash needed after settlement.
What if vendor finance or retention payments are introduced?
A vendor’s offer to receive part of the price later can ease the immediate cash requirement. Yet vendor finance and deferred consideration may create later payments, interest or security arrangements that need to work alongside the proposed lender facility.
Your acquisition finance adviser needs the amount, timing, repayment terms and proposed protections, rather than a general statement that the seller is helping. The lender may need to consider how those obligations affect cash flow and security priority.
Do not treat vendor finance as equivalent to your own cash contribution.
Retention payments require similar clarity. An amount linked to retained client fees differs from a fixed payment simply postponed.
Have your solicitor explain the proposed mechanism, including when payment becomes due. Your forecast should make the payment assumptions visible, rather than leave the amount outside the funding discussion.
Changes to the practice can matter as much as changes to the price
Due diligence may reveal that a senior employee intends to leave, a major client is reducing its work or the vendor performs more technical review than expected. Those findings concern the business that will repay the loan, even if the purchase agreement has not yet changed.
For example, replacing the vendor’s work with paid support may change sustainable operating earnings and the forecast. Explain the finding, the evidence and your proposed response. A revised operating plan gives the funding discussion something concrete to assess.
Your response might involve recruitment, a longer handover or additional working capital. The lender may ask for further information or reconsider aspects of the request.
Buyer due diligence still has its own purpose: a lender’s willingness to finance the revised deal does not establish that it makes commercial sense for you.
Buyer, security and settlement changes need a clear explanation
Changing the purchasing entity, adding an investor or adjusting ownership interests can affect the borrower information already supplied. A proposed change from an asset purchase to a share purchase also deserves attention from your legal, tax and finance advisers.
It should not be treated as an administrative substitution.
Similarly, withdrawing proposed property security, changing a guarantor or borrowing elsewhere may affect the submitted structure. Tell your acquisition finance adviser before relying on assumptions about the original facility. Any revised arrangements need to be considered against the lender’s requirements and the documents that will actually be signed.
A different settlement date can also change the cash-flow forecast, required financial updates and coordination of documents. A later date does not necessarily leave everything else intact, just as an earlier date does not remove the assessment or funding steps.
Ask what the new timetable requires.
An illustrative change with two different effects
Suppose, for illustration, a buyer submits an application for a practice priced at $1 million. The vendor later agrees to $950,000 after due diligence identifies a client group expected to leave. The buyer might initially see a $50,000 reduction in the amount required.
The funding review also needs the lost fees, costs that remain and any replacement work assumptions. A smaller purchase amount and weaker earnings can occur together.
The buyer’s revised forecast should show both, without assuming new clients will immediately fill the gap. These figures explain the mechanics, rather than imply a lender outcome.
How can you make an update easy to understand?
You do not need every answer before raising a material change. If negotiations are continuing, say what is proposed and what remains uncertain. Your acquisition finance adviser can help identify which information is needed to explain the position to the lender.
Describe the change and when you became aware of it.
Distinguish an agreed term from a proposal or unresolved finding.
Identify affected figures, documents and forecast assumptions.
Provide dated replacements and explain which earlier version they supersede.
State the relevant finance and settlement deadlines.
That brief explanation helps the people reviewing the application connect revised documents with the original request. It also avoids a common confusion: one adviser working from the new contract while another is still using the old forecast.
What should you confirm before committing further?
Ask your acquisition finance adviser what the change means for the application and what remains outstanding. Separately, have your solicitor explain the purchase obligations. The Australian Government’s business-buying guidance highlights the importance of the written contract in recording the price and payment arrangement.
Where an approval already exists, clarify whether the revised transaction needs further lender confirmation or amended documents. Do not assume the earlier approval carries across.
Your solicitor should address any necessary contractual action, because a reassessment request does not automatically extend a finance condition or settlement deadline.
Frequently asked questions
Should I report a change before it is agreed?
Raise a material proposal promptly and identify it as unconfirmed. That allows its possible funding effects to be considered without presenting negotiations as final terms.
Does every change require a new application?
Not necessarily. The response depends on the change, lender and assessment stage. Your acquisition finance adviser can clarify the required process, which may involve further information, revised assessment or new documentation.
Will a lower price mean the loan is approved?
No. The lender still considers the revised transaction and repayment capacity. A lower price may accompany weaker earnings or other changes that need assessment.
Can I rely on an existing approval after terms change?
Do not assume it applies unchanged. Disclose the revised terms and ask what lender confirmation, conditions or documents are required before relying on the funding position.
Does telling the lender extend my purchase deadline?
No automatic extension should be assumed. Have your solicitor review the contract, relevant notice requirements and whether an extension needs to be agreed.
Keep the application connected to the current deal
A changing acquisition needs a current funding assessment. Bring material developments into the discussion early, support revised assumptions with evidence and confirm what must happen next. That gives you a clearer basis for decisions as the purchase moves towards settlement.
Considering Buying an Accounting Practice?
Discuss how changes to your accounting-practice acquisition may affect the finance application with your acquisition finance adviser.
General information only. This article does not constitute financial, credit, legal, tax, accounting, compliance or valuation advice. Finance is subject to lender approval, eligibility criteria, terms, fees and conditions. Consider obtaining independent professional advice for your circumstances before acting.
