What is a quality of earnings report?
It tests whether a business's reported profit is real and repeatable. We reconcile the seller's statements to filed tax returns, general ledger detail and bank statements, substantiate or reject each add-back, examine revenue quality and customer concentration, and arrive at a normalized earnings figure you and your lender can actually rely on. It is a non-attest advisory engagement, not an audit.
Do I need a quality of earnings report for an SBA loan?
Under SBA SOP 50 10 8.1, effective October 1, 2026, 7(a) change-of-ownership loans with a purchase price of $3 million or more require an independent quality of earnings report engaged by the lender. A report commissioned by the buyer or the seller does not satisfy that requirement. Below $3 million nothing is mandated — but the lender will still test the numbers in underwriting, and many buyers commission their own analysis regardless.
How is this different from an audit?
An audit expresses an opinion on whether financial statements conform to accounting standards, and only a licensed CPA firm can perform one. A quality of earnings analysis is a non-attest advisory engagement answering a single question: what are the real, ongoing earnings of this business? It looks at what you're actually buying rather than at statement conformity — and it's faster and far less expensive.
I'm selling. When should I start?
Several months before you list — earlier than almost any owner does. A pre-sale analysis normalizes your earnings, documents your add-backs so they hold up under scrutiny, reconciles the books to your filed returns, and tests the business against a lender's coverage requirement. At that stage, problems are fixable. Discovered during a buyer's diligence, the same problems cost you price or cost you the deal.
Can a buyer rely on the report I paid for as the seller?
Not as a replacement for their own diligence, and we won't tell you otherwise. A sell-side analysis is preparation: it speeds things up and removes surprises. But any serious buyer discounts work the other side paid for, and a sell-side report does not satisfy the SBA's lender-engaged requirement. We also never work both sides of the same deal.
What size deals do you work on?
Purchase prices from roughly $150,000 to $5 million. This is deliberately the range the national and regional firms decline, because their engagement minimums sit above it — and it's where most SBA-financed Main Street deals actually happen.
What documents do you need to get started?
It depends on the engagement — each card above lists exactly what it needs. A Deal Screen starts with three years of filed returns, P&Ls plus TTM, and your add-back schedule. A Focused QoE adds bank statements, general ledger detail, balance sheets, payroll and revenue by customer; a Full QoE adds A/R and A/P aging, accrued liabilities, interim statements, contracts, IRS transcripts and the CIM. If a seller won't produce bank statements or general ledger detail, that refusal is itself a finding — and worth knowing early.
How long does it take?
A Deal Screen runs about five business days from receipt of complete records, a Focused QoE about two weeks, and a Full QoE two to four weeks. In practice the longest part is usually the seller producing documents, which is why we quote from the date records are complete rather than from the engagement date.
