The buyer wants us to carry a large seller note but is refusing to give us any visibility into the company's financial performance after the transaction closes. How do we negotiate ongoing information rights so we can monitor the health of our seller note?

Question

Tyler Smith · Accepted Answer

Accepting a seller note makes you a lender, which means you have the right to demand the same financial transparency as a traditional commercial bank. If a buyer refuses to provide ongoing financial visibility, they are asking you to fly blind while carrying all the risk. You must write strict information rights directly into the promissory note. Negotiate for monthly financial packages that include your income statement, balance sheet, and cash flow statement. These reports must be delivered within fifteen days of the close of each calendar month. Beyond raw financial statements, require the buyer to provide quarterly compliance certificates proving they are not breaching their senior bank covenants. You can also anchor this monitoring system in operational reality by requiring the buyer to share a subset of their weekly EOS Scorecard metrics, specifically focusing on customer retention, accounts receivable aging, and employee turnover. If these key indicators begin to trend downward, it gives you early warning signs long before a formal default occurs. If the buyer fails to deliver these financial packages on time, the note must include a default clause that increases the interest rate by five percentage points or triggers an immediate acceleration of the outstanding principal balance. Protect your money with contractually mandated transparency.