Add-back Sanity Check
A first pass at what a Quality of Earnings will do to the seller's number. Enter the deal, mark which add-backs you can actually document, and see coverage against the 1.25× floor lenders now have to clear. Runs in your browser; nothing is sent to us.
Seller's proposed add-backs
Enter the amount and tick "documented" only if you have the invoice, contract, or payroll record and it does not recur in prior years.
Financing
What a QoE would likely show
- Seller-reported EBITDA
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- Owner comp add-back, net of replacement
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- Add-backs accepted
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- Add-backs struck (undocumented)
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- Maintenance capex normalized
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- Normalized EBITDA
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- SBA loan amount (price less equity and seller note)
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- Annual debt service
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- Coverage (DSCR)
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- Max loan the earnings support at 1.25×
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- Implied multiple of normalized EBITDA
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Illustrative only. Debt service assumes a fully amortizing loan; lenders may add a valuation haircut, working capital, and closing costs to the project. Not lending advice.
Coverage under 1.25× means the structure changes, not the deal necessarily.
Under SOP 50 10 8.1 the lender has to use the QoE's normalized earnings, on a historical basis, against proposed debt service. If the number falls short, the levers are price, a larger equity injection, a seller note on standby, or a longer amortization for any real estate. The earlier you know, the more of those levers you still have.
- Whether deposits actually support the revenue (the Cash Proof)
- Whether the "one-time" fee shows up in all three prior years
- A customer at 40% of revenue with a contract that ends at closing
- Working capital the seller has been draining before the sale
That's the report. See what's in it.