When an SBA-backed buyer is looking at your business, the deal is being read by two different people. The buyer, who is trying to imagine themselves running it. And the underwriter, who is trying to disprove that it works.
What the underwriter is doing
The underwriter is not buying the business. The underwriter is deciding whether the business, under new ownership, will generate enough cash to service the debt while leaving the new owner enough to live on. That is the whole question.
The three numbers that matter
Trailing twelve months of EBITDA. Debt service coverage ratio with the new debt layered in. Working capital sufficient to operate the business through the seasonal low.
The underwriter is not buying the business. The underwriter is deciding whether the business will service the debt under a buyer who is not you.
If any of these three numbers is borderline, the deal is in a different conversation. If two are borderline, the deal is in trouble. If all three are clean, the question becomes whether the buyer is qualified, which is a different process.
Where deals die
The most common late-stage deal death is owner add-backs that the underwriter cannot verify. A truck that sits on the company’s balance sheet but is mostly used for personal errands. A salary line for a family member who does not actually work in the business. These are recoverable if they are clean and documented. They are deal-killers if they are sloppy.
What we tell sellers
Get the add-backs scrubbed before you go to market. Not when the LOI is signed. Not when due diligence starts. Before. Every add-back you have to defend in due diligence costs you trust, and trust is what the underwriter is measuring without saying so.