The Catch-22 of Business Acquisition: How to Prove You’re a Qualified Buyer Without a Deal

One of the biggest challenges in entrepreneurship through acquisition (ETA) is navigating the chicken-and-egg problem of securing financing and proving credibility to brokers.

Brokers want to know you’re a qualified buyer before they take you seriously, meaning they’ll often ask:

🔹 Do you have the financial backing or investors ready to fund your deal?
🔹 Are you pre-approved by a lender?
🔹 Have you successfully acquired a business before?

But here’s the problem—investors don’t want to commit to funding you until you have a deal. Similarly, banks may be hesitant to offer pre-approvals without a specific business in mind. This creates a frustrating Catch-22 where neither side wants to move first.

So, how do you break this cycle? The answer is building relationships early and securing investor endorsement letters or lender pre-approvals before you have a deal in hand.

Step 1: Build Relationships with Investors Early

Even if you don’t have a deal, you should start connecting with potential investors and capital partners as soon as possible. Many investors are open to discussions with serious buyers who have a strong plan and clear acquisition criteria.

📌 How to Build Trust with Investors Before You Have a Deal:
✅ Clearly Define Your Acquisition Criteria – Investors want to know you have a focused strategy. Be specific about industry, location, financials, and operational requirements.
✅ Showcase Your Background & Experience – Highlight your career, management, and financial expertise to prove you’re capable of running a business.
✅ Create an Investment Thesis – Investors want to know why you’re targeting a specific industry and what makes it a good opportunity.
✅ Offer Transparency & Communication – Keep investors in the loop about your deal search process, financing structure, and expected returns.

Once you’ve built rapport with investors, you can ask them to write an investor endorsement letter. This document doesn’t commit them to funding a deal but demonstrates that you have financial backers ready to support you once the right opportunity arises.

📢 Pro Tip: Even informal commitments from investors (such as a letter of intent to invest) can go a long way in proving credibility to brokers.

Step 2: Get Pre-Approved by a Bank Before You Find a Deal

Another way to bypass the broker skepticism is by securing a pre-approval from a lender. While most banks prefer to underwrite specific deals, many will offer conditional pre-approvals based on your financial situation and acquisition plan.

📌 What You Need for a Business Acquisition Pre-Approval:
✅ Personal Financial Statement (PFS) – Lenders will want to see your net worth, liquidity, and existing debt obligations.
✅ Credit Score & Financial History – A strong credit profile increases your chances of securing pre-approval.
✅ Acquisition Criteria & Business Plan – Banks will want to understand what types of businesses you’re targeting and how you plan to finance them.
✅ Proof of Equity Injection – If you’re using an SBA 7(a) loan, you’ll typically need at least 10-20% down.

A lender pre-approval letter demonstrates to brokers that you have access to financing, making you a more credible buyer even without a deal.

📢 Pro Tip: Work with lenders who specialize in SBA or acquisition financing—they understand the ETA process and are more likely to offer pre-approvals.

Step 3: Use Your Network to Gain Credibility

Even if you don’t have direct acquisition experience, you’re not alone in this process. Leverage your deal team to boost your credibility.

🔹 Brokers & M&A Advisors – Build relationships with brokers before asking for deals. Engage with their content on LinkedIn, attend industry events, and provide thoughtful feedback on deals.
🔹 Acquisition Entrepreneurs – Connect with others who have successfully closed deals—they may introduce you to brokers who take you more seriously.
🔹 CPAs & Attorneys – If you have financial or legal professionals advising you, mention them in conversations with brokers. This signals that you have a serious, structured approach.

📢 Pro Tip: Referrals from trusted professionals go a long way. If a broker hears from a lender or investor that you’re a credible buyer, they’ll be much more likely to send you quality deals.

Final Thoughts: Breaking the Cycle & Moving Forward

The Catch-22 of proving buyer credibility can feel frustrating, but the solution is simple:

📌 Build investor relationships early and secure endorsement letters.
📌 Get pre-approved by a lender to show access to financing.
📌 Leverage your deal team & network to establish credibility.

By taking these steps, you can position yourself as a serious, capable buyer—even before you’ve found a deal.

🚀 Are you navigating the ETA journey and looking for investor or lender connections? Let’s connect!

📩 Reach out via my website or LinkedIn to discuss business acquisitions.