Why do I need to show proof of funds
Did you know the statement “proof of funds” is not in the Merriam Webster dictionary? This information is interesting because the words, “proof of funds” are used daily in the Business Brokerage world.
Proof of Funds (POF) demonstrates how much money a person or entity has available in liquid assets. When purchasing a restaurant, you may need documentation showing your Proof of Funds to show the Seller or Listing Broker that you can cover the purchase costs of the restaurant transaction.
Dominique Maddox–Restaurant Broker and Founder of EATS Restaurant Brokers says, “I have experienced some serious heartburn from deals that I did not require a buyer’s proof of funds upfront. Restaurant Listings that are franchises with financial requirements, high-income listings, and SBA approved deals, I will require proof of funds before providing seller’s financials”.
A good Restaurant Broker will pre-approve buyers before sending the seller’s sensitive financial information to buyers for review. EATS Restaurant Brokers usually requires proof of funds in the form of a bank statement, 401 K statement, or letter from Bank. Once we have received the buyer’s financial information, we will send the restaurant name and profit and loss statements for review.
Proof of Funds should have the following information:
- Name of the account holder
- The balance of funds
- Date- needs to be within 3 months
- Letter from the bank-requires banker’s contact information
- Account Number is not needed
Proof of Funds not accepted
- Personal Financial Statement
- Copy of partner’s financials-if not involved in the deal
- Copy of mother’s or father’s 401K statement, but they are not part of the deal
- Copy of bank statement with balance amount blacked out
- Copy of a company’s Profit and Loss statement
- A verbal statement- I have more than enough to buy this business
- A verbal statement-I’m not showing my proof of funds until I see the restaurant’s financials
- A bank statement below the required liquid asset requirement
EATS Restaurant Brokers works with two different types of buyers. 1st the buyer that is willing to send proof of funds, and 2nd the buyer that doesn’t want to show proof of funds. Whom do you think a Restaurant Broker would prefer to work with and will respond to faster?
Some buyers feel entitled to view the seller’s financial information just because the restaurant is for sale. Imagine a buyer requesting a personal viewing for a home but doesn’t want to show their personal financial information.
EATS Restaurant Brokers advice to any buyers looking to purchase a restaurant have your proof of funds ready to show. Restaurant Brokers are looking for RAW(ready, able, and willing) buyers to convert into a closed transaction. Restaurant Brokerage is a 100% commission sales job, the buyers that are serious and ready to show proof of funds get the best customer service.