We have outstanding shareholder loans, equipment leases, and some lingering partner disputes. How do we aggressively clean up these balance sheet liabilities on our exit runway so they do not kill our deal during the buyer's legal due diligence?

Question

Tyler Smith · Accepted Answer

A messy balance sheet is a deal killer. Institutional buyers expect a clean slate, and any outstanding liabilities will be scrutinized. You must use your exit runway to resolve these issues.

Start by settling all outstanding shareholder loans. These must be repaid, documented, or converted into equity well before you begin discussions with potential buyers. Leaving these open invites questions about financial governance.

Next, address any partner or shareholder disputes. If there are inactive partners or minor shareholders with dissenting views, buy them out now. You cannot afford to have a minority owner block or delay a transaction when you are at the finish line.

Audit all equipment leases and commercial agreements. Ensure they contain clear assignability clauses that do not trigger default or require renegotiation upon a change of control.

Finally, clear up any historical tax exposures or pending legal disputes. Work with your CPA and legal counsel to obtain formal releases and settlements. A clean balance sheet signals a low-risk profile, which maintains transaction momentum and protects your valuation.