A buyer I watched close on a physical therapy practice picked up $700K to $800K of accounts receivable in the deal and $0 in cash working capital. His first real paycheck from the business didn't show up for months, and it arrived as a trickle, not a wire.
The default rule is the problem: in most asset purchases, the seller keeps the A/R.
If the business invoices on Net 15 to Net 180 terms, the work the new owner does in month 1 doesn't turn into cash until month 2 or 3, sometimes later. I've watched this catch buyer after buyer off guard in the communities I spend time in, and it's almost never because someone lied to them. It's because the timeline never made it into writing early enough to matter.
A/R belongs to the seller unless you say otherwise
The default is simple and it surprises people anyway. The seller performed the work, the seller invoiced for it, so the seller keeps the receivable when they walk. You're buying the business going forward, not the money already owed to the old owner.
This mostly hits service and trades businesses: HVAC, plumbing, electrical, medical practices, anything billing on terms instead of collecting at the point of sale. E-commerce, retail, and subscription businesses mostly dodge this problem entirely, since cash comes in with (or before) the sale.
So a buyer walking into a trades or services deal needs to plan for a cash gap that can run 2 to 3 months, sometimes longer, before revenue is running at a normal pace. I'd plan for the slow end of that range, not the fast one.
The spread I've actually seen
Three deals I've watched close, all real, all landing in a different place on the same question:
- One buyer took roughly $700K to $800K of A/R and no cash working capital at all.
- Another structured it as $50K cash plus all the A/R, including invoices that hadn't even gone out yet.
A third skipped working capital in the deal entirely and covered the gap with an existing line of credit.
Same question, three answers, and none of them are wrong. They're just different bets on how fast the buyer needed cash in hand versus how much purchase price they were willing to trade for it.
Why this belongs in the LOI, not the purchase agreement
Here's a negotiation I watched play out on an excavation company deal. The buyer's first offer came in at $3.2M with a working capital peg of $250K. The seller countered at $3.5M.
The buyer accepted the higher number on one condition: he'd take all the A/R and all the working capital with it. The broker called back almost immediately, saying the new offer was actually worse for his clients than the first one. He was right, and the seller ended up going back to the original $3.2M. The seller's side simply hadn't worked out what the A/R and working capital were worth until a counter forced them to price it.
That confusion is the whole argument for writing the cash-versus-A/R split into the LOI instead of letting it surface during the purchase agreement. By the time lawyers are drafting definitions of working capital, everyone's anchored to a number, and nobody wants to reopen it. Get specific early: how much cash, how much A/R, and at what dollar value, before either side has a reason to dig in.
The deal that died over this exact gap
I watched a plumbing franchise acquisition fall apart entirely over working capital, and it's the cleanest cautionary tale I've seen. Price was around $3.5M, revenue north of $8M, SDE around $650K, royalties running about 6% of revenue on top.
The seller's working capital estimate was around $230K. The buyer's own quality-of-earnings review put the real number closer to $630K. The lender hadn't been told any of this, so the loan was built with $0 for working capital baked in.
Then it got worse: roughly $300K of the working capital the seller was claiming turned out to be inventory that had never made it onto the balance sheet.
DSCR was sitting around 1.25, thin enough that there was no room to absorb a $400K surprise. The buyer walked. I don't think that was the wrong call. A gap that size, discovered that late, with a lender that hadn't priced it in, is exactly the kind of thing a due diligence checklist should have caught months earlier, not weeks before close.
How much to ask for
Getting a seller to leave working capital in the deal is normal, not greedy, and most experienced buyers ask for it as a matter of course. Add up first month's rent, any deposits you'll need to post, inventory you'll have to restock, and enough payroll runway to cover a cycle or two before your own invoicing catches up. That number gets uncomfortably large faster than most first-time buyers expect.
I'd rather see a buyer ask for too much and negotiate down than discover the gap live, mid-transition, with payroll due and the seller three states away.
The businesses where this problem disappears
A few business types sidestep this problem completely. I watched a flooring contractor close where the deal structure barely needed to think about working capital at all, because the business collects all materials cost and half the labor upfront from every customer before a job starts. The customer is effectively financing the job. There's no 2-month lag to plan around because the cash mostly arrives before the work does.
That's rare, in my experience, but it's worth specifically screening for if working capital is the thing keeping you up at night. A business with deposit-heavy billing changes this whole conversation.
And then the lender adds one more constraint
Most SBA lenders want to see 8 to 10% post-close liquidity, meaning personal cash or assets left over after your down payment, not counting the business itself. On a $1M loan, that's roughly $100K sitting untouched in your name the day after close.
That number doesn't move because your working capital plan came up short. So a buyer who skipped the cash-versus-A/R conversation at LOI stage can't just quietly cover the gap out of pocket either. The lender already expects that pocket to be full for other reasons.