When do I actually get paid when I sell my business?
A seller is rarely paid the full price in one lump sum on closing day: the deposit was already received earlier, the bulk of the price is wired at closing through the lawyers’ trust accounts, and any holdback, escrow, earn-out or vendor take-back portion of the deal arrives later, on its own separate schedule tied to conditions the agreement spells out.
Sellers picture closing day as the moment the money arrives. For most deals it is really the moment most of the money arrives, with several other payment events already behind it or still ahead.
What has usually already happened by closing
The deposit, paid when the definitive agreement was signed, is applied to the price at closing rather than paid again — it is already accounted for by the time the wire for the balance goes out. Understanding this ahead of time avoids the surprise of a closing-day number that looks smaller than the headline price the seller has been picturing.
What arrives on closing day itself
The bulk of the price moves through a funds flow, a coordinated set of wires between the buyer’s lender, the buyer’s lawyer and the seller’s lawyer, executed in a specific sequence so that money and signed documents change hands together rather than one side going first on faith. The seller’s lawyer typically confirms receipt in trust before releasing the documents that transfer the business, and pays out to the seller once that is complete.
What can arrive well after closing
Many deals hold back a portion of the price in escrow to cover claims that might arise under the representations and warranties, releasing it to the seller after a defined period passes with no claim made. A vendor take-back is paid over an agreed schedule that can run for years, not months. An earn-out, if the deal includes one, depends on the business hitting agreed performance targets after the seller has handed over control, which means part of the seller’s total proceeds is genuinely at risk based on how the new owner runs the business.
Why the schedule matters for planning
A seller planning retirement, a next venture, or simply their own cash flow needs to plan around the actual schedule, not the headline price. Treating a holdback or a vendor take-back instalment as already-received money before it has actually cleared is one of the more common financial planning mistakes sellers make in the months after a sale.
Sources
This answer is checked against primary sources. Links were last confirmed on the dates shown.
- 01Business Development Bank of CanadaIndustryHow to sell your business
- 02Treadstone LawLegal commentaryHow Money Actually Moves on Closing Day in an Ontario Business Sale
- 03Treadstone LawLegal commentaryHow Sellers Secure a Vendor Take-Back Loan in an Ontario Business Sale
- 04Canada Revenue AgencyGovernmentSelling a business
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