Closing Conditions
The conditions that must be satisfied before either party is obligated to close the deal.
- Financing condition language and SBA-specific carve-outs
- Outside date and extension mechanics
- Material adverse change interplay with conditions
- Third-party consent requirements
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Analyze My ContractWhat this clause actually does
Closing conditions are the requirements that must be met before either party is obligated to close. They include receipt of regulatory approvals, accuracy of reps and warranties, no material adverse change, and consents from third parties. If conditions are not met, either party can typically walk.
Why people get burned by this clause
On SBA-backed SMB deals, the SBA loan approval is a typical closing condition. If the SBA loan does not get approved by the outside date, the deal does not close. Other conditions like landlord consent for lease assignment can sink a deal at the last minute.
What should make you slow down
- No financing condition (buyer must close even if SBA loan falls through)
- Outside date (drop dead date) is unrealistically short
- Material adverse change carved out of closing conditions
- Third-party consents not addressed (landlord, top customers)
- Bring-down of reps and warranties at close uses a low materiality threshold
Where you usually see it
- Asset purchase agreements
- Stock purchase agreements
- Letters of intent
What the platform checks in the live contract
- Financing condition language and SBA-specific carve-outs
- Outside date and extension mechanics
- Material adverse change interplay with conditions
- Third-party consent requirements
- Bring-down of reps and warranties
What stronger language usually looks like
- Financing condition specifically references SBA loan approval
- 60-day outside date with extension mechanics
- Material adverse change is a closing condition
- All third-party consents listed in disclosure schedule
- Bring-down of reps and warranties at materiality standard
Definitions worth opening next
Articles that go deeper
Closing conditions are the buyer's last off-ramp. Get the financing condition right or you can be forced to close on a deal you cannot fund.
See how this clause behaves in the real contract.
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