Financing Contingency in a Commercial Purchase Agreement
A financing contingency lets a buyer cancel and recover the deposit if it cannot get a loan — many commercial PSAs leave it out entirely.
Last reviewed: May 26, 2026 by the BizLeaseCheck Editorial Team
General information, not legal advice.
Overview
A financing contingency makes the buyer’s obligation to close conditional on obtaining a loan on defined terms. Without one, a buyer that cannot fund still has to close or forfeit the deposit (and possibly face other remedies).
Commercial sellers often resist financing contingencies because they create deal uncertainty; many commercial PSAs are written with no financing contingency at all.
Topics to check
First confirm whether the contract is contingent on financing. A clause stating the agreement is "not contingent on financing" means a buyer’s inability to fund is a default. Buyers relying on a loan should not assume a contingency exists.
If there is no contingency, the practical protection is the due-diligence period — a buyer can use the free-look right to terminate if financing is uncertain, provided it does so before the deposit goes hard.
A useful contingency specifies the loan amount or loan-to-value, a maximum interest rate, the term and amortization, and a deadline to obtain a commitment. A vague "buyer to obtain satisfactory financing" can be hard to enforce and may be read against the buyer.
Tie the financing deadline to the calendar carefully so it does not expire before the buyer can realistically get a commitment, and clarify whether failure returns the deposit.
Most contingencies require the buyer to apply promptly and pursue the loan in good faith; a buyer that fails to apply can lose the protection. Keep records of the application and lender communications.
If the purchase is financed with an SBA 7(a) or 504 loan, the financing, the personal guaranty, and the lease (if the property is partly leased) interact — review the loan package and any guaranty separately, because SBA terms add occupancy, equity-injection, and collateral conditions.
Key takeaways
- Confirm whether the contract is contingent on financing at all — many are not.
- With no contingency, the due-diligence free-look is the buyer’s main protection.
- Define loan amount/LTV, max rate, term, and a realistic commitment deadline.
- Apply promptly and in good faith, and keep records.
- For SBA-financed acquisitions, review the loan package and guaranty separately.
Official resources
Legal-review notes
Guide confidence marker: Medium confidence.
- Whether a financing contingency is enforceable depends on its specificity and the governing law.
- SBA program conditions change; review current SBA requirements and the actual loan documents with counsel.
Frequently asked questions
Do commercial purchase agreements include a financing contingency?
Often not. Commercial sellers frequently require buyers to close regardless of financing, treating inability to fund as a default. Always confirm whether your contract has a financing contingency before relying on one.
What happens to my deposit if my loan is denied and there is no contingency?
If there is no financing contingency and the deposit has gone hard, a buyer that cannot close typically forfeits the deposit and may face the seller’s other remedies. The due-diligence period is usually the only safe exit.
Can I use the due-diligence period instead of a financing contingency?
Often, yes — if the period is long enough and termination is unconditional, a buyer can walk and recover the deposit if financing looks uncertain, as long as it terminates before the deposit becomes non-refundable.