Quality of earnings providers: how to choose, engage and review one

Published October 25, 2026 · Rules checked against SBA and IRS sources as of October 2026

Questions to ask

1. Have you done SBA-scope QoEs, including a cash proof over 12 months plus two fiscal years?
2. Who is your client on this engagement? (For SBA: the lender.)
3. Any relationship with the seller, the seller's accountant or the broker?
4. How do you reconcile to IRS transcripts?
5. What's the fixed fee for this scope, and what changes it?
6. Who on your team does the work, and who signs?
7. How do you report findings that lower earnings?

Red flags

• No cash proof, or a cash proof only for the latest year.
• Will "work with the seller's numbers" without bank statements.
• Fee depends on the deal closing.
• Also prepared the seller's books or tax returns.

The engagement letter

A lender-side QoE engagement letter should name the lender as client, define the target and periods (trailing 12 months plus the last two fiscal years for SBA), list required procedures (source reconciliation including IRS transcripts, cash proof, documented adjustments, revenue quality), confirm independence from the seller, set out data access, timing assumptions and fee, and state who may rely on the report. Getting this right avoids a report the lender can't use.

Clause checklist

Does the provider need to be a CPA?

SBA does not say a QoE must be prepared by a CPA. SOP 50 10 8.1 requires an "independent, experienced financial professional" working for the lender's benefit, and the report must not be prepared by or for the seller. Many QoE providers are CPA firms, and CPA involvement is common, but the SBA test is independence, experience and the required scope, including a cash proof and reconciliation to IRS transcripts.

See the full SBA QoE requirement.

When the buyer already has a QoE: the vendor review

Under SOP 50 10 8.1, a buyer may commission its own QoE before approaching a lender, and the lender may have that report reviewed by one of its approved vendors to save cost. The vendor's review findings go into the loan file with the original QoE. The lender may not rely on a QoE prepared by another party without that review, and a QoE prepared by or for the seller can't be used at all.

What a good review covers

• Independence of the original provider from the seller.
• Reconciliation of accountant-prepared statements, tax returns, internal statements and IRS transcripts.
• Cash proof: trailing 12 months and two fiscal years.
• Every add-back documented, including the five SBA-named categories.
• Revenue quality: customer concentration, contract continuity, sustainability post-sale.
• Any update needed if the original is stale or the deal changed.

See the SBA QoE requirement.

A short scoring guide for lenders

Running a QoE panel

Lenders doing regular acquisition lending usually keep a small panel of approved QoE vendors, the same way they do for valuations and appraisals. The SOP refers to the lender's "approved vendors" when it describes reviews of buyer-commissioned reports, which assumes the lender has a vetted list. A practical panel process covers initial due diligence on each provider (sample reports, credentials of the people who sign, independence policies), assignment of orders by someone outside loan production, a review checklist applied to every report, and an annual refresh that looks at revision rates and turnaround. Rotating work across two or three providers avoids dependence on one firm and gives the lender a basis for comparison.

When the QoE and the valuation disagree

Because both reports work from the same records, their earnings should reconcile. When they don't, it's usually because the valuer accepted an add-back the QoE rejected, or used internal statements where the QoE used tax return figures. The lender should resolve the difference before credit approval, typically by sending the QoE to the valuer and asking them to confirm or revise their earnings base. The SOP requires the lender to use the QoE's earnings for debt service coverage, so leaving a valuation on higher earnings in the file creates an inconsistency a reviewer will notice.

Questions to ask before you sign

1. Who on your team will do the work, and who signs the report?
2. Have you worked with the seller, the seller's accountant or the broker before?
3. Will the engagement letter name the lender as client and list the SBA-required procedures?
4. What will you need from the seller in the first week?
5. How will you report findings that reduce earnings, and how quickly?
6. Will you talk to the valuer so both reports use consistent earnings?

Clear answers to these predict a smooth engagement better than a low quote does.

What a lender should expect after engagement

A well-run QoE engagement has a predictable rhythm. In the first days, the provider sends a document request based on the checklist and schedules a call with the seller's bookkeeper or accountant. Once the documents are in, it reconciles sources and runs the cash proof, raising questions as it goes rather than saving them for the end. A draft follows with the bridge and preliminary findings, which the lender reviews for completeness against SBA's scope. Final findings come after the seller has had a chance to respond to factual questions through the lender. Lenders should expect to be told early if earnings look materially lower than the seller's figures, because that changes the loan size and sometimes the deal.

OKtoLend prepares lender-side QoE reports to the SOP scope, with the lender as client. Tell us about the deal and we'll reply with pricing and timing within one business day.

Whoever you choose, keep the engagement letter, the independence statement and any vendor review in the credit file with the report itself.

Common questions

Related guides

• Quality of Earnings (QoE): what it is and what it tests
• Quality of earnings report: an annotated example, template and document checklist
• Business valuation services: what you're actually buying
• SBA Quality of Earnings requirements for lenders on $3 million-plus acquisitions
• SBA Qualified Source: who can sign a 7(a) business valuation
• Proof of cash reconciliation: how it works in a lender-side QoE

This guide explains rules and practice in plain English. It isn't legal, tax or credit advice, and SBA and IRS rules change. Check the current SOP, regulations and your lender's requirements before you rely on anything here. Examples with made-up businesses are illustrations, not real deals.