When you’re selling a business, the buyer’s bank becomes critical. No loan approval means no deal, and banks are notoriously cautious.
The bank valuation blind spot
Banks are not interested in your growth optimism or market upside. They’re interested in downside protection for the person they lend the money to – your buyer. Ensuring they hold enough capital reserves to cover defaults. This means bank valuations actually drive what the market can actually pay, as most buyers will use bank finance either in full or in part.
Most owners don’t realise they’re being valued through a risk-management lens, not a growth lens. Banks ask what could go wrong, not what could go right. That’s their job. But it creates a problem: your desired asking price may feel reasonable to you based on earnings and market conditions, yet the buyer’s bank won’t support it because the bank’s valuation comes in lower.
Practical solutions
Understanding how banks will value your business requires clarity upfront:
- Know how banks value yours before you market. This ensures your buyer can actually secure financing, and you won’t price yourself into a deal that collapses at loan approval stage.
Key takeaways
Banks aren’t wrong about valuation; they’re simply answering a different question. Your real market value sits at what the buyers can finance, and that is essential to getting realistic offers and closing deals that actually fund.