Quality of Earnings
Quality of Earnings for SBA 7(a), Main Street & Middle Market Deals
Quality of Earnings reports for lower middle market buyers and sellers. We calculate normalized EBITDA, trace every adjustment to the general ledger, and test working capital and cash flow. The report is built to hold up in due diligence.
How ACE CPAs protects your business deal price
Four points in a deal where the agreed price holds or slips.
The buyer team starts checking records.
They find hidden problems in your books and you learn about them during a tense call with no answers ready.
A sell-side QoE finds the same issues months earlier, while you still have time to fix them.
An expense add-back faces questions.
You know an item was personal, but you lack receipts, so the money comes right off your final price.
Every add-back is tied to a general ledger entry and its support, so the buyer can verify it and accept it.
Working capital targets face debate.
The final number gets argued over at the closing table based on memory, and the shift hurts you.
The working capital target is set from trailing monthly balances, documented before anyone sits at the closing table.
Financial reviews take too long.
Weeks pass while accountants rebuild files, the deal loses momentum, and buyers lower their offers.
Your report and adjusted EBITDA bridge are ready before diligence starts, so the deal keeps moving.
What your final document includes
- Normalized earnings calculationEvery add-back is checked against your books and tied to source documents, so buyers and lenders can rely on the adjusted EBITDA.
- Income and customer reviewWe test revenue consistency and customer concentration to show whether earnings are likely to hold after the sale.
- Normalized working capital reviewWe analyze monthly working capital to support a target based on history, not negotiation.
- Liabilities and hidden debtWe look for unrecorded expenses, unpaid obligations, and other items buyers treat as debt, so they surface before closing.
Managing project scope and financial complexity
Multiple entities, multi-state filings, and long-term customer contracts add work to any review. We scope these up front in the proposal so there are no surprises mid-engagement.
If the target's books need cleanup before a reliable QoE is possible, we tell you before you sign the engagement.
Transaction advisory for buyers and sellers
- Selling your businessRun a sell-side QoE before going to market, so issues show up in your report instead of the buyer's. That leaves time to fix them and prepare clear answers.
- Buying a businessAfter you sign the LOI and before you close, we test the seller's adjusted EBITDA, working capital, and debt-like items so you know what you are paying for.
How a QoE engagement runs
Two weeks from a complete file. Larger or more complex files are scoped up front, before you sign.
- Day 1
Scoping call
We review the deal, the books, and the LOI, then send a fixed-fee proposal and engagement letter.
- Days 1 to 2
Data request
You get one request list. We review what you send and tell you in writing what is still missing, usually within 2 business days.
- Weeks 1 to 2
Fieldwork
We trace adjustments to the general ledger, build the adjusted EBITDA bridge, and test working capital and debt-like items.
- End of week 2
Report and Q&A
You get the written report and supporting workbook, and we walk you, your lender, or the other side through the findings.
Quality of Earnings engagements completed. Every report is signed by a licensed CPA.
Not ready for a full QoE?
Start with a $499 Pre-LOI Review: a one-page deal model, written review, and verdict in 3 to 5 days. The fee is credited toward your QoE.
See the Pre-LOI ReviewQuality of Earnings for SBA 7(a) acquisition loans
Under SOP 50 10 8.1, Appendix 15, SBA 7(a) acquisitions with a Business Purchase Price of $3 million or more need a Quality of Earnings report engaged by the lender. Reports commissioned by the buyer or the seller do not qualify. We prepare the lender-engaged version.
- Engaged by the bankIndependent of the buyer and the seller, as Appendix 15 requires.
- Appendix 15 scope, line by lineCash proofs, adjusted earnings, and a supporting workbook your credit team can review.
- Two weeks from a complete fileWritten gap list within 2 business days so the loan number never waits on us.
Other services
Bring your LOI or CIM.
Thirty minutes with a licensed CPA from our deal team. We go through the deal, tell you what the review needs to cover, and quote a fixed fee, whether or not you engage us.
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