For SBA 7(a) lenders

Quality of Earnings, prepared for the lender

For Initial Acquisitions and Business Expansions with a Business Purchase Price of $3 million or more, SOP 50 10 8.1 requires a Quality of Earnings report in addition to the valuation, and requires you to use its earnings in the DSC calculation.

What the report covers

• Reconciliation. Accountant-prepared statements, tax returns, internal financials and IRS transcript data tied into one normalized earnings figure.
• Cash proof. Bank statement receipts and disbursements reconciled to the income statement and tax return for the trailing 12 months and the last two fiscal years, to surface unreported income and undisclosed expenses.
• Adjustments. Every add-back and adjustment documented: non-recurring items, owner compensation, related-party transactions, deferred maintenance, cash versus accrual differences.
• Revenue quality. Customer concentration, contract continuity and whether revenue and margins are likely to hold after the sale.
• A DSC-ready number. Earnings in the form your credit memo needs.

Buyer already has a QoE?

SBA lets a lender have a buyer-commissioned QoE reviewed by one of its approved vendors instead of starting over, with the review findings kept in the file alongside the original. We can do that review. See reviewing a buyer's QoE.

Pricing and timing

Fees are fixed per report, agreed up front and never contingent on the result or on loan approval. Tell us about the deal and we'll reply with pricing and timing within one business day.

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Read more

• The SBA QoE requirement
• How a proof of cash works
• What's in a QoE report
• Independence and conflicts policy