The New SBA Quality of Earnings Requirement: What Sellers Need to Know

About the Episode

If your business sells for $3M or more to a buyer using an SBA loan, that buyer must now complete a quality of earnings review before the loan closes. This episode explains the SBA quality of earnings requirement, what the new procedures check, and what they leave out. You will learn how to find and explain problems in your numbers before a buyer’s team does, so they do not delay your sale or cost you the deal.

What You’ll Learn

• Expect a QoE on any SBA deal of $3M or more: The SBA now requires a quality of earnings review on acquisitions of $3M or more, excluding real estate. The adjusted EBITDA it confirms feeds the lender’s underwriting and the valuation, so weak records can hold up financing.
• Prepare before the buyer’s team arrives: Commission your own sell-side review so you know the likely findings and can plan your response. Sellers who are blindsided by an adjustment often decide the buyer is chiseling and walk away, which wastes everyone’s time and money.
• Document unusual movements in your books: A drop in an inventory reserve raised EBITDA and led one buyer to demand a couple hundred thousand dollar deduction. Applied to a multiple, that ran into the millions, and the seller left the deal over an issue that proper documentation later resolved.
• Look past the SBA checklist: The required procedures do not cover working capital. Unearned customer deposits can be treated as debt in a cash-free, debt-free deal, and in one case they may have equaled 20% to 30% of the purchase price.
• Hire a QoE specialist, not just a CPA: Start with a CPA firm, then check references, background, and whether the team does transaction work full time. QoE is a specialty, and a generalist may miss the issues that move price.

Topics Covered

Want More? Related Resources:

• Maximizing Your Business Valuation with a Sell Side QofE
• Major Changes to SBA Loans (July 2025)
• Quality of Earnings in M&A – The Ultimate Guide
• SBA Financing When Buying or Selling a Business
• Bill Wiersema on LinkedIn

This episode provides general information only and does not constitute legal, tax, accounting, or other professional advice. The guest’s views are his own and do not necessarily reflect the views of Morgan & Westfield.

Meet Our Guest

Bill Wiersema

CPA with Miller, Cooper & Co. | Chicago, Illinois

Bill Wiersema is a CPA with Miller, Cooper & Co., specializing in M&A financial due diligence. He is also the author of several books on finance. He has assisted middle-market companies, private equity groups, financial institutions, and international entities across Asia, Europe, and Latin America. Bill has extensive experience assisting sellers across diverse industries in preparing for sale, conducting due diligence, creating business plans and projections, assisting in negotiations with financial institutions, and advising clients on post-acquisition financial issues.

LinkedIn: https://www.linkedin.com/in/billwiersema/