Working Capital in an Arizona Business Sale: the full guide

On a Main Street sale, working capital is the cash, inventory, and receivables that keep the shop open next Tuesday. Payables sit on the other side. It is not a private-equity peg I can recite as law. How much of that package stays in the business at closing is a negotiated term.

Buyers want a normalized operating balance sheet. Sellers often assume the asking price is the only number. Those two views collide in diligence if we do not write the definition early.

Structure changes what transfers. See asset sale versus stock sale in Arizona. I walk the line items on the file.

Cash-free, debt-free is a common framework. The seller keeps excess cash and pays off operating debt. The buyer steps into a shop that can run without a surprise check the first week. Exact definitions belong in the term sheet.

Excess cash is not the same as the till you need on Monday. Operating debt is not always the same as a seller note. I will not treat those phrases as a universal formula. I will write what they mean on your file.

Inventory is the fight I see most. Sometimes it is inside the enterprise price. Sometimes it is a separate true-up at closing. The LOI should say which. Count it. Age it. A cooler full of dated product is not the same as a current stock list.

Receivables have the same problem. Current AR that customers actually pay is different from invoices that have sat. If the buyer is taking AR, we say so. If you are keeping it, we say that too.

Temp staffing firms live on receivables, because field payroll goes out every week and clients pay on terms. How that gap gets funded and handed over is on selling a staffing agency in Arizona.

Distributors feel this most, because they carry both heavy stock and customer terms. That file is on selling a distribution business in Arizona.

Prep the aging reports before anyone asks. How that review runs is on how diligence works for Arizona sellers.

Under-funded working capital means the buyer writes a bigger check the week after closing. That is why they fight. Clear definitions reduce that fight. I put the treatment in the letter of intent so diligence is a check.

What belongs in that letter is on what an LOI covers in an Arizona business sale. The purchase agreement can refine the math. It should not invent the rule after you already shook hands.

The worksheet that starts that conversation is Value My Business. How I run the rest of a listing is on Sell My Business.