We want to clean up our balance sheet and debt structure well in advance of a sale. How do we optimize our business credit profile and debt service history on our runway so a buyer can easily secure acquisition financing?

Question

Tyler Smith · Accepted Answer

A clean exit requires more than just strong margins; it requires a healthy capital structure and a clean credit profile. Buyers and their lenders will scrutinize your balance sheet long before they sign a letter of intent. To prepare your capital structure, start by reviewing your existing debt agreements and business credit profiles. Ensure that all liabilities are clearly structured and that your debt service coverage ratio is healthy. Next, clean up any personal guarantees or intercompany loans. Many founders mix personal and business credit, which complicates due diligence. Work with your advisors to separate these lines of credit completely, ensuring that the business stands on its own financial feet. Additionally, optimize your working capital cycle. Standardize your invoicing and collections processes to ensure a predictable cash flow history. A clean, stable balance sheet proves to a buyer's financing source that the company is a low-risk candidate for acquisition leverage. By addressing these credit and balance sheet factors on your runway, you make it much easier for a buyer to secure the necessary financing to close the deal. This preparation reduces transaction risk and ensures a smoother, faster path to a clean exit.