Purchase Agreement Seller Checklist

Most sellers spend months preparing to list their business and about 48 hours reviewing the document that actually transfers ownership. That document is the purchase agreement.

By the time you get to a purchase agreement, the LOI is signed, due diligence is winding down, and everyone is ready to close. The temptation is to move fast. That temptation is where sellers get hurt.

Here is what a purchase agreement seller checklist actually covers, what you need to verify before you sign, and where the real risks hide in language most people skim.

What a Purchase Agreement Is (And What It Is Not)

A purchase agreement is the legally binding contract that governs the transfer of a business. Everything in the LOI was a handshake. Everything in the purchase agreement is a commitment with consequences.

The LOI outlined the deal structure: price, asset or stock sale, seller note terms, transition period, non-compete. The purchase agreement does not just restate those terms. It defines what happens when either party fails to perform on them. That is a fundamentally different document, and it deserves fundamentally different attention.

Representations and warranties, indemnification clauses, escrow holdbacks, closing conditions, survival periods. All of it lives here. If you signed an LOI saying “3.5x SDE, seller note on 10-year standby,” the purchase agreement is where you find out what “standby” actually means in practice and whether that definition matches what you thought you agreed to.

Get an M&A attorney to review it. Not a general practice attorney. Not the lawyer who did your estate plan. Someone who reads purchase agreements for business acquisitions regularly. This is not the place to cut costs.

The Purchase Agreement Seller Checklist: What to Verify

This is the core of your review. Go through every item.

Purchase Price and Adjustments

Confirm the total purchase price matches the LOI. Then read the working capital adjustment clause carefully, because most sellers do not. The majority of SBA deals include a working capital peg, meaning the final price can shift up or down at close based on the actual working capital delivered.

If the LOI said “$1.4M purchase price,” the agreement might deliver $1.37M if working capital comes in slightly below the peg. That is a $30K difference that surprises sellers who assumed the price was fixed. Know what the peg is, how it is calculated, and what the adjustment mechanism looks like before you sign.

Asset Versus Stock Sale Classification

Confirm whether this is an asset sale or stock sale. The large majority of small business acquisitions under $5M close as asset sales. This affects what liabilities transfer with the business, what assets are included or excluded, and how the purchase price gets allocated across asset categories for tax purposes.

The allocation matters to you as the seller because different asset categories (goodwill versus equipment versus inventory, for example) are taxed differently. Talk to your CPA before you agree to an allocation schedule. Not after.

Seller Note Terms

If a seller note is part of the deal structure, and on most SBA deals it is, verify every term in the note: principal amount, interest rate, term length, and standby provisions.

On SBA 7(a) deals, the seller note is typically structured on full standby. Zero principal payments, zero interest payments to you during the standby period, which can run up to 10 years. That is standard. We see this structure on roughly 90% of deals. What is not standard is a seller note with ambiguous standby language or a partial standby structure that conflicts with SBA requirements (which the SBA’s Standard Operating Procedures lay out in detail).

Make sure the note terms in the purchase agreement match exactly what the LOI stated. Word for word if possible.

Representations and Warranties

Reps and warranties are statements of fact you are making about the business. Common examples: the financial statements are accurate, there is no pending litigation, you have the right to sell the assets, key contracts are assignable, and there are no undisclosed liabilities.

Read every single one. If any of them are inaccurate, even unintentionally, you can face indemnification claims after close.

Pay close attention to “knowledge qualifiers.” A rep that says “to the seller’s actual knowledge” is meaningfully different from one that says “the seller represents and warrants that no litigation exists.” The first limits your exposure to what you genuinely knew. The second makes you liable regardless. Your attorney will catch this language. Make sure they do.

Indemnification Provisions

Indemnification is what happens when a rep and warranty turns out to be wrong. This section defines your exposure: how long buyers can make claims (the survival period), what the floor is before claims can be made (the basket or deductible), and what the ceiling is on your total liability (the cap).

Common structure: survival period of 18 to 24 months, basket around 0.5% to 1% of the purchase price, cap at 10% to 20% of the purchase price. Anything materially outside those ranges warrants a conversation with your attorney and a counteroffer.

Escrow and Holdback

Some deals include an escrow holdback at close where a portion of the purchase price, typically 5% to 15%, is held in escrow for 12 to 18 months to cover potential indemnification claims. If this is in your deal, confirm the amount, the release conditions, and who holds the funds.

You want the escrow released automatically if no claims are made by the end of the escrow period. Not subject to further approval from the buyer. That distinction matters.

Non-Compete Agreement

Nearly every business acquisition includes a non-compete as a condition of closing. Confirm the scope: geographic area, industry or business type, and duration. Most SBA lenders require a non-compete for 2 to 5 years covering the same type of business in a reasonable geographic area.

Overly broad non-competes (national scope, vague industry definition, 10-year term) are negotiable. Your attorney should flag anything that restricts you beyond what is reasonable for the deal size and industry.

Transition Period and Consulting Agreement

If you agreed to a transition period in the LOI, the purchase agreement should specify the length, your compensation during transition (if any), and what your obligations actually are. “Training the buyer” is vague. The agreement should say how many hours per week, for how many weeks, in what capacity.

This section also governs what happens if the buyer fails to pay you for consulting work during transition, or if the transition extends beyond the agreed term. Get those details in writing.

Where Purchase Agreements Create Surprises for Sellers

So that covers what to verify on the checklist. But even sellers who review every item above still run into problems. Here are the sections that consistently generate disputes after close.

Earnouts That Are Harder to Collect Than They Look

If any portion of your deal includes an earnout tied to post-close performance, read the earnout calculation methodology in detail. “20% of the business exceeds $1.2M in revenue in year one” sounds simple enough. The purchase agreement version often includes revenue definitions, exclusions, and buyer discretion provisions that make that payment harder to trigger than you expected going in.

Earnouts are legitimate deal structures. But they are also the section of purchase agreements most commonly written in the buyer’s favor. Have your attorney evaluate whether the earnout as written is actually achievable or effectively illusory. There is a real difference between an earnout that incentivizes performance and one that gives the buyer a discount they never have to pay back.

Assignment of Contracts and Customer Consents

If your business has key customer contracts, supplier agreements, or leases that need to be assigned to the buyer at close, the purchase agreement should address this as a closing condition. If a major contract cannot be assigned without consent, and that consent is not obtained before close, you may face liability or the deal may not close at all.

Pull your key contracts before the purchase agreement is drafted. Identify any assignment restrictions. Work through them before they become a closing day problem, because at that point your negotiating position is at its weakest.

Closing Conditions That Are Not All in Your Control

Every purchase agreement includes closing conditions: things that must be true for the deal to close. Some are in your control (delivering financial records, getting lease assignments). Some are not fully in your control (SBA final approval, third-party consents, landlord cooperation).

Read the closing conditions carefully and understand which ones are assigned to you. If a condition fails and it is your responsibility under the agreement, you could be in breach even if the failure was not entirely your fault. Side note: this is one area where experienced M&A counsel earns their fee quickly, because the risk allocation in closing conditions is often buried in language that looks routine.

How SBA Financing Affects the Purchase Agreement

Because most qualified buyers acquiring businesses in the $500K to $5M range use SBA 7(a) financing, the purchase agreement has to conform to SBA requirements. This is not a complication. It is actually a feature that protects both parties, because it forces structure into deals that might otherwise be loosely drafted.

SBA lenders have standardized requirements around deal structure: how the seller note is treated, what the equity injection looks like, how working capital is handled, and what representations the seller needs to make. When a buyer’s advisory team is experienced with SBA acquisitions, the purchase agreement is structured from the start to meet those requirements. No surprises at the lender review stage.

Where sellers get into trouble is when a deal is drafted without that SBA fluency. A seller note that does not conform to SBA standby requirements can delay or kill the deal at the lender level even after the purchase agreement is signed. We have watched this happen on deals where the buyer’s attorney had corporate M&A experience but no SBA experience, and the distinction matters more than most people realize.

This is one of the reasons working with a well-advised buyer actually benefits you as a seller. Regalis-backed buyers bring deal structuring expertise to the table from day one. The purchase agreement is drafted with SBA conformity built in, not retrofitted at the last minute. And there is no cost to you for any of that. Zero.

What to Do If Something Does Not Match the LOI

Go back to the LOI and compare it line by line with the purchase agreement. Purchase price, seller note terms, included and excluded assets, transition period, non-compete scope. Every material term from the LOI should have a corresponding provision in the purchase agreement that matches.

If something changed between the LOI and the draft purchase agreement, it is not necessarily bad faith. Sometimes terms shift during due diligence. A working capital true-up, a revised asset list, an earnout added because something concerning surfaced in the financials. These things happen. But every change should be understood, intentional, and acceptable to you before you sign.

Redline every difference and discuss it with your attorney before countering or signing. And if a buyer cannot explain why a term changed from the LOI to the purchase agreement, that tells you something about how the rest of the relationship will go.

Frequently Asked Questions

What should a seller review in a purchase agreement before signing?

Sellers should verify the purchase price and any working capital adjustment, seller note terms, representations and warranties, indemnification provisions (basket, cap, and survival period), escrow holdback amounts, non-compete scope, transition period obligations, and whether the asset or stock sale classification matches the LOI. Each of these carries real financial or legal risk if left unreviewed.

How long does it take to finalize a purchase agreement for a business sale?

After an LOI is signed, purchase agreements typically take 2 to 4 weeks to negotiate and finalize. The timeline depends on how many reps and warranties need to be negotiated, whether third-party consents are required, and how responsive both parties are to redlines. SBA deals add lender approval time on top of that, bringing total close time from LOI to 60 to 90 days in most cases.

Can a seller negotiate the terms in a purchase agreement?

Yes. The purchase agreement is a negotiated document. Indemnification caps, escrow holdback amounts, survival periods, non-compete scope, earnout terms, and working capital pegs are all negotiable. Buyers will push for seller-unfavorable terms as a starting point. A qualified M&A attorney representing the seller can identify overreaching provisions and push back where the risk is meaningful.

What is the difference between an LOI and a purchase agreement?

A letter of intent is a non-binding document that outlines the key terms of a deal: price, structure, exclusivity period, and basic conditions. A purchase agreement is the legally binding contract that governs the actual transfer of the business. It builds on the LOI but adds legal specificity around representations and warranties, indemnification, closing conditions, and remedies for breach.

Does a seller need an attorney for the purchase agreement?

Without exception, yes. The purchase agreement is where legal and financial risk is allocated between buyer and seller. Representations and warranties commit you to statements of fact about the business. Indemnification provisions define your post-close liability. Non-compete clauses restrict what you can do professionally for years. You need an M&A attorney reviewing and negotiating on your behalf before you sign.

Ready to Understand What a Qualified Buyer Looks Like?

The purchase agreement seller checklist above assumes you are already in a deal with a serious, well-prepared buyer. Not every offer gets there.

Regalis Capital works with serious, pre-qualified buyers who use SBA 7(a) financing and bring experienced M&A advisors to the transaction from day one. The deal structure is right, the financing is in place, and the purchase agreement is drafted to close, not to stall.

There is zero cost to you as the seller. No fees, no commissions, no obligation.

If you want to connect with a buyer who is ready to move professionally through every stage of the process, including the purchase agreement, start the conversation here.