Common mistakes and how to avoid them
Top deal process mistakes
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Top deal process mistakes
Ten mistakes that derail deals, extend timelines, and damage relationships. These apply to both originators and capital providers because deal execution is a two-party exercise.
The pattern: deals that should have closed in 16 weeks take 28 weeks because of avoidable process failures. Every extra week costs money: legal fees, bridge financing, opportunity cost, and relationship strain.
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1. Timeline underestimation
The mistake: Planning a warehouse closing in 10 weeks when the actual process takes 20.
What it looks like in practice:
You tell your board the warehouse will close in 10 weeks. Your capital provider’s IC process takes 6 weeks alone. Document negotiation takes another 8 weeks. Account opening, UCC filings, and other closing mechanics take 3 more weeks. The actual timeline is 20 weeks.
Meanwhile, you’ve burned through 10 weeks of runway expecting imminent closing. You need capital in 6 weeks and the process is only half done.
The cost:
- For originators: Cash runway pressure, potential need for bridge financing at 15-20% rates, forced acceptance of suboptimal terms
- For capital providers: Deal fatigue from the originator, pressure to shortcut diligence, potential loss of the deal to a faster competitor
- Both parties: Relationship strain from unmet expectations, legal fees for extensions and amendments
Warning signs you’re making this mistake:
- Your timeline is based on best-case assumptions
- You haven’t asked your capital provider how long their IC process takes
- You’re planning parallel processes sequentially
- First-time originators: you’re estimating based on what someone told you once
Process checklist to prevent this mistake:
| Structure | Typical First-Deal Timeline |
|---|---|
| Forward flow agreement | 6-10 weeks |
| Warehouse (unrated, first facility) | 14-22 weeks |
| Warehouse (unrated, repeat issuer) | 10-16 weeks |
| Term ABS (unrated, 144A) | 18-26 weeks |
| Term ABS (rated) | 24-36 weeks |
Add 30-50% buffer for your first deal with a new capital provider. Build your runway plan around the high end of these ranges, not the low end.
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2. Inadequate data room
The mistake: Sending a pitch deck and a few unlabeled Excel files and waiting for diligence requests to come in.
What it looks like in practice:
You send a Dropbox link containing a 40-page pitch deck, two Excel files with no labels, and a folder called “Misc.” The capital provider’s diligence team requests 35 additional items. Each request-response cycle takes a week. Six cycles in, the capital provider has lost confidence in your operations.
The cost:
- For originators: Diligence extends by 4-6 weeks, capital providers move on to other deals, remaining provider prices the deal as a first-time issuer with data gaps (50-75 bps wider)
- For capital providers: Staff time wasted on information extraction, inability to conduct efficient diligence, risk of missing material issues buried in disorganized data
Warning signs you’re making this mistake:
- Your data room has fewer than 50 clearly labeled files
- You don’t have a data dictionary
- File names include “final,” “v2,” or “latest”
- You’ve never done a dry run of your data room with an outsider
Process checklist to prevent this mistake:
Build a Tier 1 data room before going to market:
- Formatted loan tape with data dictionary
- 12+ months of static pool data with vintage analysis
- 3 years of audited financials (or all available if newer)
- Detailed origination guidelines with credit box parameters
- Executive summary addressing the 20 most common diligence questions
- Organizational chart with key personnel bios
- Sample transaction documents (if you’ve done prior deals)
- Third-party diligence reports (if available)
Use a professional data room platform. Name files clearly: “Loan Tape - 2025-Q4 - with data dictionary.xlsx,” not “Tape_v3_FINAL.xlsx.”
Prepare written answers to common questions before the first meeting.
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3. Not running parallel workstreams
The mistake: Running deal setup steps sequentially when most of them can run simultaneously.
What it looks like in practice:
You sign a term sheet, then start searching for a trustee. After selecting a trustee (3 weeks), you begin talking to backup servicers. After selecting a backup servicer (4 weeks), you start account opening. Total: 7 weeks of pure delay on top of the documentation timeline.
The cost:
- 6-8 weeks of unnecessary delay
- Continued equity burn while waiting for the facility to fund
- Capital provider questioning your operational capability
- Potential deal expiration or re-pricing
Warning signs you’re making this mistake:
- You start each workstream only after completing the previous one
- You don’t have a deal management tracker
- Nobody owns the critical path
- You’re surprised when closing tasks take longer than expected
Process checklist to prevent this mistake:
Things to run in parallel from term sheet:
- Trustee selection and fee negotiation
- Backup servicer selection and onboarding
- Account opening paperwork (preliminary)
- Legal counsel engagement and scope definition
- UCC lien search and filing preparation
- Entity formation (if SPV is new)
Things that must be sequential:
- Legal drafting depends on term sheet finalization
- Account opening depends on entity formation (if SPV is new)
- First purchase depends on all closing conditions
Build a deal management Gantt chart from the day you receive an indicative term sheet. Identify the critical path and staff accordingly.
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4. Letting documentation drag
The mistake: Allowing document negotiation to proceed without milestones, a live issues list, or escalation paths.
What it looks like in practice:
Your capital provider’s counsel sends the first draft of the indenture. Your counsel marks it up 3 weeks later. Their counsel responds 2 weeks after that. Eight rounds of comment exchange later, 14 weeks have passed on document negotiation alone, and both sides have lost track of which issues are still open.
The cost:
- Extended timelines increase legal costs ($5K-$15K per additional week of active negotiation)
- Deal fatigue leads to poor late-stage decisions
- Both parties start making concessions just to finish
- Relationship damage from prolonged adversarial negotiation
Warning signs you’re making this mistake:
- There’s no agreed documentation timeline
- You don’t have a live issues list
- Lawyers are negotiating without principal involvement
- You can’t answer “what are the three biggest open issues?”
Process checklist to prevent this mistake:
Set documentation milestones at the beginning of the phase:
| Milestone | Target |
|---|---|
| First draft issued | Day 0 |
| Originator markup | Day +10 |
| Capital provider response | Day +18 |
| All-hands call to resolve issues | Day +25 |
| Final documents for signature | Day +35 |
Use a “live issues list”: a shared document tracking every open point by section, with a clear owner and a proposed resolution for each. Review it on every call.
Escalate stuck issues quickly. If a provision has gone back and forth for three rounds with no resolution, the lawyers should escalate to the business people.
Separate the “must haves” from the “nice to haves.” Document which issues you’re willing to lose in order to close.
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5. Not reading the final documents
The mistake: Completing the negotiation but not confirming the final documents match the negotiated terms.
What it looks like in practice:
The credit team negotiates the deal over six weeks. The business people agree on key terms. The deal hands off to operations and legal for documentation. Nobody on the business side reads the 180-page executed documents.
Two years later, the capital provider discovers the advance rate definition was modified during documentation. A provision negotiated at term sheet was quietly changed. There’s no recourse because the documents were signed.
The cost:
- Provisions documented differently from how they were negotiated
- No recourse on signed documents
- In a stress scenario, you discover adverse terms you agreed to unknowingly
- Legal disputes over “what we agreed to” vs. “what the documents say”
Warning signs you’re making this mistake:
- Business people haven’t read the final documents
- There’s no “term sheet vs. docs” reconciliation
- The signing ceremony is treated as a formality
- The deal summary was prepared by counsel, not reviewed by principals
Process checklist to prevent this mistake:
Before signing, the deal principal (not just counsel) should read:
- Advance rate definition and all eligibility criteria
- Waterfall priority (who gets paid when)
- All trigger definitions and their consequences
- Covenants (financial and operational)
- Amendment consent requirements
- MAC and Event of Default definitions
- Termination and acceleration provisions
Conduct a “term sheet vs. docs” reconciliation: line by line, confirm every economic term from the executed term sheet is reflected accurately in the final documents.
Create a plain-English deal summary (2-3 pages) that captures all material terms. Update it at every amendment.
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6. Surprising your capital provider
The mistake: Disclosing material changes late in the process rather than immediately.
What it looks like in practice:
You’re in the final stages of documentation when you disclose for the first time that your CEO is being replaced, you’ve entered a new line of business not covered by the facility’s eligibility criteria, and your Q3 delinquency ticked up 80 bps. None of this was shared proactively.
Your capital provider invokes a “material change” right and returns to term sheet. What should have been a routine closing becomes a 6-week renegotiation.
The cost:
- Final spread is 50 bps wider than originally agreed
- Covenants are tightened
- Goodwill with your capital provider is burned
- Future amendments will be approached with suspicion
- Potential deal collapse if the capital provider loses confidence
Warning signs you’re making this mistake:
- You’re holding back information hoping it won’t matter
- You’re rationalizing “it’s not material” without asking
- You’ve had internal conversations about “when to disclose”
- You’re surprised when the capital provider asks about something
Process checklist to prevent this mistake:
Disclose early, not late. If something material changes during the deal process, tell your counterparty immediately:
- Changes in key personnel (CEO, CFO, Head of Credit, Head of Servicing)
- Material changes in financial performance or projections
- Regulatory actions, investigations, or inquiries
- Litigation developments
- Changes in business strategy or product mix
- Portfolio performance deterioration beyond normal variance
Frame disclosures proactively: “Here’s what happened, here’s the context, here’s what we’re doing about it.”
Surprises always cost more than disclosures. What you disclose proactively can be managed; what they discover triggers defensive reactions.
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7. Changing terms after IC approval
The mistake: Allowing documentation-phase negotiations to alter IC-approved economics without re-approval.
What it looks like in practice:
The capital provider’s IC approves a deal at SOFR+250 on 80% advance. During documentation, the originator’s counsel negotiates the advance rate up to 82% without flagging it to the business people. The capital provider’s counsel accepts it. Nobody gets back to IC. The deal closes at different terms than IC approved.
The cost:
- Risk management failure: the deal on the books differs from the deal in the IC minutes
- At the next portfolio audit, this creates a compliance issue
- In a loss scenario, the additional 2-point advance rate is unrecoverable
- Potential regulatory or LP disclosure issues
Warning signs you’re making this mistake:
- Lawyers are negotiating economics without principal involvement
- There’s no change log tracking term deviations
- The closing memo doesn’t reconcile to IC approval
- Nobody compares final terms to IC-approved terms
Process checklist to prevent this mistake:
Build a change control process:
- Document all IC-approved terms in a “baseline” sheet
- Any deviation requires written approval from the deal sponsor
- Material deviations require a return to IC (define “material” in advance)
- Maintain a “change log” documenting every term change from IC to close
- Closing memo includes explicit reconciliation to IC approval
Build a closing IC review into the process for all deals: a brief presentation before signing confirming the final terms match the approved terms.
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8. Underestimating counterparty setup time
The mistake: Treating account opening and counterparty setup as something that can be done in the week before closing.
What it looks like in practice:
Account opening is triggered the week before the scheduled closing date. The account bank requires a 10-business-day setup period, needs an original resolution from the SPV board, and requires the indenture to be in final form before opening accounts. All three requirements push the closing by 3 weeks.
The cost:
- On a deal where you have an equity bridge loan at 15%, a 3-week delay costs $75K in bridge interest on a $50M deal
- Legal fees for extensions and amendments
- Both parties’ staff time consumed by rescheduling
- Potential covenant issues on bridge facilities
Warning signs you’re making this mistake:
- Account opening is on your closing checklist, not your critical path
- You don’t know the account bank’s requirements
- You haven’t started account opening paperwork before documents are final
- You’re assuming counterparties can move on your timeline
Process checklist to prevent this mistake:
Account opening is on the critical path. Start the account opening process at term sheet, not at final documents:
- Get the account bank’s requirements list on day one of documentation
- Understand what they need: entity documents, indenture excerpts, signatures
- Know their timeline: most banks need 5-15 business days minimum
- Open accounts in draft or preliminary form if possible
Same approach for other counterparties:
- Trustee acceptance: 10-20 business days typically
- Backup servicer onboarding: 2-4 weeks for system setup
- UCC filings: 3-5 business days for filing, but need final documents first
Build buffer into your closing timeline. Assume every counterparty will take the maximum quoted time.
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9. Not budgeting for closing costs
The mistake: Approving a deal at IC without including setup costs in the return calculation.
What it looks like in practice:
The capital provider approves a deal but hasn’t included an origination fee in the term sheet because “we don’t typically charge them.” The deal takes 6 months to close (not the expected 4), and legal and diligence costs are $120K vs. the $60K budgeted.
The deal economics as modeled included no setup cost recovery. The capital provider is $60K in the hole before the deal funds, and there’s no mechanism to recover it.
The cost:
- Deal may need to run for 3+ years just to break even on setup costs
- If the deal terminates early, setup costs are a total loss
- Repeated underrecovery of setup costs erodes fund returns
- Staff time isn’t free but is often unaccounted
Warning signs you’re making this mistake:
- Your IC model doesn’t include setup costs
- You’ve waived the origination fee to win the deal
- Your actual closing costs consistently exceed budget
- You don’t track setup cost recovery separately
Process checklist to prevent this mistake:
Budget closing costs at the IC stage. Include them in the deal ROE calculation:
| Cost Category | Typical Range | Recovery Method |
|---|---|---|
| Legal (your counsel) | $25K-$100K | Origination fee |
| Legal (originator’s counsel, if you pay) | $25K-$75K | Origination fee |
| Due diligence (third party) | $15K-$40K | Origination fee |
| Internal staff time | $15K-$50K | Spread over facility life |
| Travel and site visits | $5K-$15K | Origination fee |
Include origination fees (0.5%-1.5% for new deals) in all term sheets. They exist specifically to cover setup costs and compensate for deal risk.
If the deal only makes sense at 3+ years of duration, flag that as part of the IC recommendation. If the originator terminates at 18 months, you’re underwater.
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10. Treating the deal as a one-time transaction
The mistake: Negotiating at arm’s length as if this is the only deal you’ll ever do together.
What it looks like in practice:
Both parties negotiate as if extracting every possible advantage. Every concession is zero-sum. The negotiation is adversarial. Both sides arrive at closing having “won” their points.
Twelve months later, the originator needs an amendment. The capital provider responds with a 60-day review period and a $50K fee quote. The relationship is transactional, not collaborative.
The cost:
- The originator’s next facility (the $200M warehouse that comes after this $50M one) goes to a capital provider they trust and have worked well with
- The capital provider who “won” the first deal negotiation loses the long-term relationship
- Every amendment and waiver is a contentious negotiation
- Neither party has invested in goodwill that pays off in stress scenarios
Warning signs you’re making this mistake:
- Every negotiating point feels like a battle
- You’re tracking “wins” and “losses” in the negotiation
- Concessions are extracted, not offered
- Post-closing communication is minimal
How both parties should approach this:
In every negotiation, identify the issues that matter economically and hold firm on those. Concede graciously on issues that don’t change the economics.
The best outcome is a deal where both parties feel they negotiated well. Deals where one party feels they were beaten will not repeat.
Maintain the relationship through the life of the deal, not just at close:
- Quarterly calls with your counterparty, even when everything is fine
- Proactive performance updates before they’re required
- Early disclosure of issues (see Mistake 6)
- Response to reasonable requests within days, not weeks
ABF is a relationship business. The trust you build in the first deal is what enables the second deal, the third deal, the amendment you need, and the waiver that saves you. Don’t sacrifice long-term relationship value for short-term negotiating wins.
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Deal process timeline template
A realistic first-deal timeline for an unrated warehouse:
| Week | Originator Activities | Capital Provider Activities | Parallel Workstreams |
|---|---|---|---|
| 1-2 | Data room finalized | Initial screening | |
| 3-6 | Management meetings, diligence calls | Due diligence, site visit | |
| 7-8 | Diligence Q&A | IC preparation | Trustee selection begins |
| 9-10 | IC approval, term sheet issued | Backup servicer selection | |
| 11 | Term sheet negotiation and signing | Account opening begins | |
| 12-15 | Document review and markup | Document drafting and negotiation | UCC searches, entity formation |
| 16-18 | Document finalization | Counterparty onboarding | |
| 19-20 | Signing and closing | First purchase |
Total: 20 weeks. Add buffer for holidays, unexpected diligence findings, and document negotiation complexity.
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Related topics
- Preparing your data room expands on Mistake 2 with templates and checklists
- Deal process overview provides the full timeline and workflow
- Negotiation strategies addresses Mistakes 4, 6, and 10 with tactical guidance
- Transaction document guide supports Mistake 5 with section-by-section review guidance