Selling a Business With Debt: Can It Be Done?

If your business has debt — a bank loan, lease agreements, or credit with suppliers — that doesn't mean it can't be sold. By far most businesses that get sold have some form of debt. What matters is how the debt is handled in the deal itself, and what type of debt is involved.

Share purchase: the debt comes along

If a new owner buys the whole company (a so-called share purchase), the buyer generally takes over the entire company — including its debt. That's rarely something that stops a deal; instead, it's reflected in the price. The debt is typically deducted from the price the buyer is willing to pay, or handled via a specific pricing mechanism in the purchase agreement, where the final price is adjusted based on the business's net debt on the takeover date.

Asset purchase: the debt typically stays with the seller

If instead a deal is structured where the buyer only takes over specific assets — inventory, fixtures, customer relationships, machinery — without taking over the company itself, the debt generally stays with the seller's company, unless otherwise specifically agreed. That's one of the key differences between the two deal types, and one of the reasons the choice between them matters a great deal, both tax-wise and practically.

What about leases and ongoing agreements?

Lease agreements and other ongoing obligations often require the other party's consent (e.g. the leasing company) before they can be transferred to a new owner. This needs to be clarified early in the process — it can't just be assumed to automatically come along, regardless of whether it's a share or asset purchase.

Debt isn't the same as insolvency

It's important to keep two different situations separate. A business with debt that can still pay its creditors on time is a perfectly ordinary, sellable business — the debt is just part of the overall picture the buyer needs to address. A business that genuinely can't pay its creditors is something else: here, the situation is no longer "a business with debt that needs to be sold", but an insolvency situation heading toward restructuring or bankruptcy. In that situation, it's not an ordinary sale process you need — it's legal and insolvency advice that needs to be on the table first.

How to handle it as a seller

• Be open about the debt from the start. It'll come out during due diligence regardless, and openness builds trust.
• Consider which deal type makes the most sense. If the debt is tied to assets the buyer wants to take over anyway, that argues for a share purchase. If the debt is more general or hard to overview, an asset purchase can be a cleaner solution for both parties.
• Get clarity on what requires third-party consent — particularly lease agreements and loans with special terms.

Frequently asked questions

Does a buyer automatically take over the business's debt?

In a share purchase, generally yes — the debt comes along with the company and is typically reflected in the price. In an asset purchase, the debt generally stays with the seller's company, unless otherwise specifically agreed.

Can I sell a business that can't pay its bills?

That's a different situation than ordinary debt — if the business is genuinely insolvent, it's heading toward restructuring or bankruptcy, and you should seek legal advice instead of attempting an ordinary sale process.

Should I choose a share purchase or an asset purchase if there's debt?

It depends on the situation — a share purchase lets the debt come along and be reflected in the price, while an asset purchase typically keeps the debt with the seller's company. Have an accountant assess what makes the most sense in your specific case.

Read more about the difference between a share purchase and an asset purchase, or about what the purchase agreement should include when debt is part of the picture.