Selling a business with outstanding loans

Outstanding borrowing affects both transaction structure and completion funds. Identify the borrower, lender, balance, security and guarantees for each facility. Check repayment and consent provisions before assuming that the buyer can take over the debt or that the seller will be released automatically.

Obtain a reliable redemption figure and identify how security and guarantees will be released. Distinguish an agreement between buyer and seller from a release granted by the lender. If debt remains after completion, document the intended treatment and verify that it fits the facility terms.

Identify every facility and the actual obligors

Prepare a borrowing schedule showing borrower, lender, principal, accrued interest, fees, security and guarantees. Include overdrafts, asset finance, invoice finance and related-party loans where relevant. Obtain complete facility documents and amendments. The balance shown in bookkeeping may not equal the amount required to repay on completion, particularly where interest accrues daily or early repayment charges apply.

Map obligations across the seller, target and buyer entities. A loan to the target may remain with it in a share sale, but the facility can still contain change-of-control requirements. An asset sale may require repayment or release of security over the transferred assets. Do not assume the buyer can take over the debt merely because its offer deducts the balance from the price.

Obtain lender decisions early enough for completion

Identify the consents, waivers or refinancing required and the lender's information needs. Coordinate the request with the agreed transaction structure and timetable. A lender may require underwriting or additional security, so approval should not be described as an administrative formality. Keep conditional approvals visible and verify that their conditions can be satisfied with the intended completion funds.

Distinguish release of the company's debt from release of a personal or group guarantee. A promise between buyer and seller does not bind the lender. Obtain appropriate lender documentation for the intended release and check its scope. The guide to Deferred consideration and payment risk helps assess buyer promises to pay later, which should not be confused with a creditor actually discharging an existing obligation.

Reconcile redemption and security documents

Request a current redemption statement for the intended completion date, including payment instructions verified through a trusted route. Explain how the amount changes if completion moves. Check that funds reach the correct recipient and that any surplus or shortfall has an agreed treatment. Avoid using a stale estimate from the first offer as the final repayment figure.

Review the legal release or discharge of security and the appropriate public record update. Companies House explains how an MR04 filing records satisfaction and changes the status on the register; it does not remove the historic charge entry. ^[1] Do not treat a register status update as a substitute for obtaining the lender's actual release documents or addressing security registered elsewhere.

Integrate debt into the price and funds schedule

Show how repayment, cash, debt adjustments and any retained borrowing interact. A debt deduction in the price and a separate completion payment can produce double counting if the mechanism is unclear. Work through the flow of funds with legal and financial advisers. Identify who pays each amount, from which account, and what evidence authorises completion to proceed.

Use Completion accounts and price adjustments for completion accounts definitions and Contracts that need consent on a business sale for the wider consent matrix. If borrowing remains after completion, confirm covenants, guarantees, security and responsibility for future reporting. The buyer needs to understand the continuing cash burden and restrictions, while the seller needs clarity about any residual exposure. Record the agreed position rather than relying on an informal statement that the buyer is taking everything over.

For Business sale document review, provide the borrowing schedule, facilities and proposed sale funds calculation. Flag personal guarantees and any lender communication already received. Ask for a coordinated repayment, consent and release checklist with responsible parties. After completion, reconcile receipts and confirm outstanding filings or discharge evidence. Keep unresolved items open until the actual documents arrive, rather than marking the whole facility closed solely because money was sent on completion day.

Verify the funds flow before money moves

Prepare a schedule showing the purchase money, lender repayment, transaction costs and any balance payable to the seller. Check the identity of each recipient and the conditions attached to releasing funds. A repayment figure should be current for the intended date and consistent with the lender's agreed instructions.

Resolve differences between the loan ledger and the redemption statement before completion where possible. Accrued interest, fees or another secured facility may explain a discrepancy, but they should not be assumed away. Coordinate the financial calculation with the legal release documents so the transaction team understands which action extinguishes a debt and which action releases or records the associated security. Those are related steps with different evidence.

Illustrative scenario

A seller expects the buyer to assume a company loan and release a personal guarantee. The lender has not agreed. The parties review the facility and make the lender's required arrangements part of completion, rather than relying on a buyer promise that does not bind the lender.

Preparation checklist

• Collect facility, security and guarantee documents.
• Confirm balances, fees and redemption timing.
• Obtain required lender consents and release arrangements.
• Match completion payments to the agreed funds schedule.