Glossary
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Proof of funds
« Back to Glossary IndexRefers to documentation or a statement from a financial institution, often a bank, certifying that an entity or individual has the necessary liquid assets to cover the proposed acquisition or investment. This proof assures the seller and other involved parties that the buyer possesses the financial capability to fulfill the terms of the deal. Typically, the proof of funds may encompass bank statements, letters from financial institutions, or other official documents confirming the availability of funds. This evidence of financial capacity is required at various stages of the M&A process, such as when submitting an initial offer, entering negotiations, or finalizing the transaction. Sellers and stakeholders seek this confirmation to mitigate the risk of entering into agreements with buyers who may lack the financial means to execute the transaction. In essence, proof of funds enhances transparency and trust in M&A dealings, providing assurance that the acquiring party has the financial backing necessary for a successful and smooth acquisition.
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