Glossary · Reading the business
Contingent liabilities
In short
These are potential financial obligations that depend on the outcome of a future event, like a pending lawsuit or product warranty claim. They aren't current debts but could become liabilities.
What it means in a deal
During due diligence, you must identify any contingent liabilities the business faces. These can significantly impact the business's future cash flow and valuation if they materialize. Work with your attorney to assess the risk and consider escrow or holdback arrangements to protect yourself.
Related terms
Common questions about Contingent liabilities
- What happens if the business being acquired has significant outstanding tax liabilities at closing?
- What if the business I want to acquire has undisclosed liabilities discovered during due diligence?
- Does finding significant undisclosed liabilities during due diligence kill an SBA 7(a) acquisition loan?
- If multiple owners each guarantee the loan, are their liabilities typically joint and several or individual?
- Can unreported tax liabilities discovered during due diligence from the seller's business kill my acquisition loan?
- Can I purchase a business with an SBA 7(a) loan if it has significant environmental liabilities?
Defined by CapBench SBA Intelligence — plain-English definitions for business buyers, lenders, advisors, and AI agents, grounded in public SBA rules and records. Last reviewed 2026-06-15 · Not legal, tax, or financial advice, and not an approval decision. Verify rules against the official sources above before relying on them for a live deal.
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