5 Common Delays in Business Escrow

Business escrow should take 60 to 90 days from opening to closing. In practice, many deals take four months or longer. The delay is rarely the escrow company’s fault. It is almost always a missing document, an unresolved lien, or a party that did not prepare. At Secured Trust Escrow, we see the same five delays over and over. If you know them in advance, you can prevent them. Here is what slows business escrows down and how to keep your deal on track.

1. Missing Corporate Resolutions and Authority Documents

The seller signs the purchase agreement. The buyer deposits funds. Then the escrow company asks for the corporate resolution authorizing the sale, and the seller realizes they never had a board meeting. Or the LLC operating agreement requires unanimous member consent, and one member is traveling in Europe for three weeks. This delay is completely preventable. Before you open escrow, check your corporate documents. If you are a corporation, hold a board meeting and pass a resolution. If you are an LLC, get written consent from all members. If you have a partner who is hard to reach, get their signature before you list the business for sale. The escrow company cannot release funds to a seller who cannot prove they have the authority to sell. This is not bureaucracy. It is basic protection for the buyer.

2. Unresolved UCC Liens and Secured Debt

The UCC search comes back, and there is a lien on the equipment from a lender the seller forgot about. Maybe it is a loan from five years ago that the seller paid off but never got a release for. Maybe it is a current line of credit that is secured by all business assets. Either way, the lien must be resolved before the buyer gets clear title. The seller must contact the lender, obtain a payoff letter, and file a UCC-3 termination statement. If the lender is slow to respond, the delay can stretch for weeks. The solution is simple: run a UCC search before you list the business for sale. If there are liens, start the payoff process early. Do not wait until the buyer’s due diligence uncovers the problem.

3. Incomplete Asset Schedules and Missing Inventory

The purchase agreement says the sale includes “all equipment and inventory per Schedule A.” But Schedule A is a spreadsheet from 2019 that lists equipment the seller sold two years ago. Or the inventory count at closing does not match the schedule because the seller stopped ordering new stock after the deal was signed. The buyer wants to verify the assets before releasing funds. The seller wants to close. The escrow company is stuck in the middle. The fix is to update the asset schedule before opening escrow and to conduct a physical inventory count during the due diligence period. If equipment has been sold or replaced, update the schedule. If inventory fluctuates, specify in the purchase agreement whether the buyer gets the inventory at cost, at market value, or a fixed amount. Ambiguity creates delay.

4. Third-Party Consents and Landlord Approval

The buyer wants the lease. The lease says the landlord must consent to any assignment. The landlord takes two weeks to respond, then asks for the buyer’s financials, then wants a personal guarantee, then goes on vacation. Meanwhile, the escrow sits open, the deposit is tied up, and both parties get frustrated. The same problem happens with vendor contracts that require consent, franchise agreements that need franchisor approval, and customer contracts that have change-of-control provisions. The solution is to identify all third-party consent requirements before signing the purchase agreement. Contact the landlord, the franchisor, and the key vendors early. Get a preliminary approval before you open escrow. If the landlord or franchisor is likely to be difficult, build extra time into the escrow timeline.

5. Disputes Over Escrow Instructions

The buyer’s attorney drafts escrow instructions. The seller’s attorney revises them. The buyer objects to the revisions. The seller insists on a clause the buyer hates. The instructions go back and forth for three weeks while the escrow company waits. This is the most frustrating delay because it is entirely within the parties’ control. The solution is to negotiate the escrow instructions at the same time as the purchase agreement, not after. If the purchase agreement is clear about closing conditions, deposits, and default provisions, the escrow instructions should be a formality. Use a qualified escrow company that has seen hundreds of business deals and can suggest standard language that both sides will accept. At Secured Trust Escrow, we provide template instructions for common deal types, which cuts the negotiation time dramatically.

Typical Delay Timeline

Frequently Asked Questions