The New SBA SOP
What the Quality of Earnings Requirement Means for Business Acquisitions

Chapter 1: Welcome and the New SBA SOP

Fran: Welcome, everyone, and thank you for joining us today for our discussion on the SBA's new standard operating procedure, SOP 50 10 8.1, and what it means for buyers, sellers, lenders, brokers, attorneys, and advisors involved in business acquisition transactions.

Fran: The SBA periodically changes its standard operating procedures to provide guidance to lenders participating in the SBA 7(a) loan program, and the newly issued SOP represents one of the most significant updates in recent years, particularly for change of ownership transactions and business acquisitions financed through SBA lending.

Fran: One of the most discussed provisions is the introduction of a required independent Quality of Earnings, or QoE, analysis for certain acquisition transactions with a business purchase price of $3 million or greater. The SOP also establishes specific requirements for who may perform that work, what analyses must be included, and how lenders are expected to use those findings in their underwriting process.

Fran: Historically, SBA lenders have mostly relied on business valuations, tax returns, financial statements, and lender due diligence to evaluate acquisition opportunities. These new rules add another layer of financial scrutiny designed to validate the sustainability of earnings and cash flow. For business owners considering a future sale, transaction readiness will become increasingly important. For buyers, it may result in greater transparency and confidence. For lenders, it creates a new diligence requirement. And for attorneys, brokers, accountants, and transaction advisors, it may influence deal timing, transaction structure, and how businesses prepare for market.

Fran: Our goal today is to move beyond the technical language of the SOP and focus on the practical questions. How will the new requirements impact acquisitions? What should sellers know to prepare? How will lenders approach these transactions? What role will QoE play in the future? And ultimately, will these changes strengthen the acquisition market?

Chapter 2: Meet the Panel

Fran: To help answer those questions, I'm joined by an incredible panel of professionals representing many stakeholders in the business transaction process. We have Melissa Bustarde, a partner at Branfman Mayfield Bustarde & Reichenthal, a boutique law firm, and a business attorney who represents buyers and sellers of small businesses in sales of up to $5 million. We have Josh Siler, a Senior Finance Consultant with PBO Advisory Group and a Quality of Earnings Specialist who works with companies preparing for transactions and financing events. We have Ryan Smith, Principal and Founder of ThinkSBA, a leading SBA brokerage with extensive experience structuring acquisition financing. And last but not least, we have Steven Hanson, Owner of Transworld Business Advisors and an experienced business broker who works closely with owners on business valuations, buyer negotiations, and successful exits. Thank you all for being here. Good to see you all.

Chapter 3: What the SBA Is Working to Solve

Fran: Ryan, I'm going to start with you. The SBA has significantly expanded its due diligence requirements for acquisition loans. What do you think the SBA is really trying to solve here?

Ryan: The first thing they are trying to solve, and we have known this for a long time, is that lenders interpret and apply the SOP differently. Over the past four years especially, it has been a bit of the wild, wild west. Recently, we have seen several lenders, entire shops that were climbing the ranks in the SBA 7(a) lending space, close their SBA operations. Literally last week, one of my bankers could not keep a meeting we had scheduled. He texted me that he would talk with me tomorrow, and the next day's conversation was, "Ryan, yesterday our entire SBA lending department was laid off."

Ryan: So I think the SBA is trying to streamline and create more of a level playing field, and I'm a big fan of these updated guidelines. I don't think this is ultimately for the lenders. I think it is for the borrowers. Lenders may have delinquent loans, but there is a backstop for that through the SBA 7(a) guarantee. What about the borrower who went with a lender that got a little loose with the SOP, and the next thing you know, they are facing bankruptcy and being pursued by collectors? That is a big burden to carry.

Chapter 4: What a Quality of Earnings Uncovers

Fran: It is. Josh, you are our QoE expert. What is the QoE in due diligence under the SBA trying to uncover?

Josh: It is uncovering whether the earnings are real, recurring, and supportable, because the valuation is built on those earnings, which leads to the purchase price. You have to spend real diligence tying back to source records, not just relying on financial statements or trusting the narrative. The quality of earnings is exactly that: the quality of the numbers you are building a very large transaction on. We test add-backs and all sorts of items. For these SBA deals, the question is pretty clear: can the buyer and lender rely on these earnings to repay the debt?

Fran: Exactly to your point, Ryan, it really helps the borrower.

Chapter 5: How Sellers Are Responding

Fran: Steven, how do you think sellers are reacting to these new requirements? Is it a concern for sellers?

Steven: There are so many different things going on for sellers right now, and this is one more thing coming along. Many are just finding out about it. Most sellers go into an SBA transaction thinking it is about the buyer, and that there is nothing in it for them to do. We do a lot of education before we even list a business, talking with the seller about the potential of an SBA loan and what it means for them. It is not just about whether the buyer can borrow. The lender will look at your business the way they would look at a home they are appraising. They will ask whether the business is for real, and, getting back to Josh's point on the QoE, whether the numbers are real, whether the earnings are really there in the revenue, and what is behind those numbers. They will take a very good look at your business and ask you a million questions.

Steven: What is good about this for sellers, and what sellers are saying as they learn more, is, "You know what? I think I like this." Getting back to Ryan's point, the buyer should be stronger. We will probably talk more in this podcast about searchers, people with low amounts of equity trying to buy a business for very little down. It is a bit like back to the future. Lending got loose during COVID for all the reasons we know, and now it is tightening back up. I think sellers will see, and be happy about, getting a better buyer.

Chapter 6: LOIs, Negotiations, and Transaction Timelines

Fran: Very good point. Melissa, from a legal perspective, how do you think this SOP will impact deal negotiations or transaction timelines?

Melissa: It is going to create a big change at the outset that we will have to start addressing in our LOIs: what happens if the QoE comes back lower than everyone is expecting? The prudent thing is to address this in the LOI at the outset with a couple of different options. It needs to be addressed up front, because if the LOI is silent and the numbers come in lower than everyone thinks, it becomes very difficult to resolve what happens to the purchase price.

Melissa: Further down the road, in due diligence, I expect this will extend our due diligence timelines and the entire transaction process, depending on how efficient the QoE provider is. Theoretically, it could run in tandem with everything else in due diligence, but as providers receive a surge of new requests, they could get backlogged, which would push out transaction deadlines.

Fran: Timing is one of the most important factors when Josh and I do a QoE, because a quality of earnings is only as good as the date of the data you are evaluating. If a deal lengthens, you have to revisit the analysis, because some businesses have seasonality and fluctuation. Revisiting can complicate deals.

Chapter 7: SBA Offers vs. Non-SBA Offers

Fran: Steven, do you think sellers will evaluate the strength of an offer based on the lending? If there is an SBA-backed loan versus a non-SBA deal, will one hold a stronger position in a seller's mind?

Steven: These are things sellers have always had to evaluate. If I receive multiple offers, what price are they coming in at? There may be a range. Then, who is the buyer? Is one buyer stronger than another, with more experience or more equity going in? I think sellers will ask more questions of their buyers, brokers, and the other parties about the best chance of the loan closing. What bank is the buyer using? Ryan knows more about this than I do, but is it a preferred lender? How many deals does that bank do? The chances of a loan going through may be better with one bank than another. So sellers will be asking a lot more questions.

Steven: And to your point, if I have an offer with an SBA loan and a very similar offer without one, and all of the financing comes together for the non-SBA deal, that one will probably win. That gets back to what Melissa said about due diligence and timelines likely extending with SBA financing. Especially with a cash buyer, the process tightens up and moves faster, and the SBA-financed buyer may lose out to one with cash.

Chapter 8: When the QoE Requirement Comes Into Play

Fran: Interesting. Ryan, when a borrower uses SBA financing to purchase a business, when should they expect the lender to bring up the quality of earnings requirement?

Ryan: The SOP takes effect October 1, and it is based on purchases of $3 million or more. That means purchase prices of $3 million or more, not necessarily loan amounts of $3 million. From my own experience, I just closed a deal of about $4.5 million. Great borrower, and he had already engaged a quality of earnings firm. Everything came out fine, and he bought the business. So, back to my thoughts on this update, the SBA is simply standardizing practices that should have been happening or already were happening, and providing clarity for lenders. I think that is a good thing.

Ryan: As for quality of earnings providers, the cream will rise to the top for those who have already been doing this work. In my own business, when the SOP rules loosened after COVID, suddenly everyone was an SBA loan broker. When the housing market tempered, many people became SBA loan experts overnight. I expect we will see a lot of new quality of earnings experts appear as well. But the firms that have been doing this, with the reputation and track record to show for it, will rise to the top.

Chapter 9: Purchase Agreements and Working Capital

Fran: Melissa, you represent buyers and sellers, and you mentioned LOIs addressing this issue. Do you see other documents or requirements that will be modified in your process?

Melissa: Definitely. In addition to the LOI, the same type of language will need to carry over to the purchase agreement, because the SBA requires a signed purchase agreement at some point during underwriting. I'm not yet 100 percent clear at what point the QoE will come in during underwriting. If we need a signed purchase agreement, the financing contingency language we build into the LOI will need to move into the purchase agreement. What happens if the quality of earnings report comes in below what the financials represent? Do we go straight to open negotiation? Is there an exit for the buyer? Is there an automatic adjustment to the purchase price on a percentage basis? There are many options, and which one you lean toward depends on whether you are the seller or the buyer.

Fran: Right. There are earnouts and net working capital adjustments. You can get really creative with the deal making process.

Melissa: Very much so. I would also add that in the purchase agreement, one area we will likely start refining is the working capital calculation, to make sure the definitions and parameters align with what is found in the quality of earnings report. Historically, we defer to the balance sheet, but if those numbers do not align with the quality of earnings report, we could see disputes down the road.

Chapter 10: QoE vs. an Audit, Tax Return, and Valuation

Fran: For our listeners, Josh, can you explain the difference between a quality of earnings, an audit, a tax return, and a business valuation? Melissa is spot on. If the working capital calculation needs to be defined based on the QoE, it helps to understand the distinction.

Josh: That is a good point to include. A quality of earnings also includes a quality of working capital analysis that is baked in. The items you mentioned are different products for different purposes. A tax return is compliance with tax authorities, the IRS, under the Internal Revenue Code. An audit, meaning a financial statement audit, review, or compilation performed by an independent CPA firm, confirms that the numbers are fairly stated under the applicable reporting standards. It addresses general business figures like revenue, earnings, and balance sheet items in accordance with U.S. GAAP or whatever basis of accounting the company uses.

Josh: A quality of earnings is different. It gets to adjusted EBITDA or seller's discretionary earnings, depending on the size and type of deal. There is not as rigid an authority on how to define adjusted EBITDA. There is no FASB codification that says yes or no on what is in or out, so it comes down to the quality of earnings provider's experience to state what is fair. It defines what an outside party like PBO agrees or disagrees with, and we come back with our own number in the report. That quality of earnings report is the crux of what goes into the business valuation to determine what a buyer should actually offer.

Chapter 11: Findings That Concern Lenders

Fran: Ryan, in your experience, what kinds of findings in QoE reports most concern a lender?

Ryan: For example, if they find in the chart of accounts that revenue or expenses were overstated or understated, or that there is income or expense that should not be in the business at all. We have all seen income and expenses that really belong on the personal side, or adjustments that are not justifiable. When the quality of earnings report is reviewed, it levels the playing field. I really like that, because all of the different players have their own opinions. One party will say something should be added back because it helps them, and the other will disagree.

Ryan: A lot of times you will find personal items. I was working with a seller here in San Diego who started an Airbnb business and ran the construction for the property through his completely unrelated business. Company-prepared statements can be wild sometimes.

Josh: It is a business expense when the IRS is there, but not when the quality of earnings team is there.

Chapter 12: Commissioning a Sell-Side QoE Before Going to Market

Fran: Very true. Steven, in addition to those, do you have other examples?

Steven: I was just going to say, Ryan, I have never seen that before. Never.

Fran: I'm sure you have other examples you could share.

Steven: We could share a lot of good stories about that. But one thing we are doing now, especially with the QoE, is with businesses we represent that have EBITDA of a million dollars or more. We are telling those sellers we will do a QoE now, even as we go to market or before we go to market.

Ryan: Practice.

Steven: Right, because we want to find out what is going on. Will the buyer or the SBA accept that QoE? Let's assume no. It is a cost the seller absorbs, but they gain a lot of confidence in their numbers, and we can use it when we represent the seller to a buyer. When we go to the bank, we can show we have done this work. The bank may say the data is six or eight months old and want to refresh it or use a different provider. But we will have a very good idea of what someone like Josh would uncover and question, because that work has already been done. Maybe we thought we had an add-back that does not hold, or they uncover income that should not have been included and needs to come out. Do we need to adjust our valuation?

Steven: So we are being more proactive with larger deals. Not the Main Street, smaller deals, which are not being asked to do this anyway and are a different type of deal. But on larger deals, like the $4.5 million Ryan just mentioned, with a $5 million cap, the banks are going to look closely. So let's get into those numbers early.

Fran: That's smart. Then you have a strategy for the sale and the business value, with expectations set for both the seller and the marketplace. It makes a lot of sense to look at that proactively.

Chapter 13: Adjusted EBITDA vs. Normalized Earnings

Fran: Very practically speaking, Josh, where have you seen EBITDA look really strong but normalized earnings did not hold up?

Josh: How much time do you have? That is always the game. I have seen a meme where the whole burger is adjusted EBITDA and a single slice of lettuce is free cash flow, because that is what is really left. It comes down to accounting methods and how consistently they are applied. Revenue recognition method changes are the most obvious and the ones we see most. Coming up on 12 months before selling a business, a company suddenly accrues things faster, and you want your QoE to look back multiple years. You see the business take off in the last 15 months and ask what happened, and the answer is, "We accrue faster. Look at our AR." It is at 300 days. Things like that.

Josh: Anything involving the word normalization can boost adjusted earnings. That is not to say it is wrong. We expect normalizing, and that is the point of a quality of earnings. But you need to understand what and how. I have seen bad debt reserves turned around to boost earnings: a write-off of 20 percent of AR last year that supposedly should not count, when back testing shows the business should be accruing two or three percent a year. That is the normalized number. Or a big advertising campaign described as nonrecurring and added back entirely, when the business is an online retailer where advertising is a normal part of operations, even if it is incurred unevenly rather than monthly. Telling the story of how earnings are normalized is what gives a quality of earnings its quality. Those are the most creative approaches I see that separate adjusted EBITDA from the cash flow a business can actually support for a new buyer.

Chapter 14: Industries That Will See More Scrutiny

Fran: Melissa, to Josh's point, are there industries or transaction types you think will face greater scrutiny under the quality of earnings requirement?

Melissa: Definitely the ones Ryan and Steven alluded to, which tend to be founder-based and a little lenient in using business funds for personal expenses. I would also expect cash-based businesses, retail-type businesses, and restaurants to be heavily scrutinized.

Fran: We also see businesses with multi-year contracts that do not maintain a solid work in progress schedule. They may recognize revenue too fast or too slow. Construction, real estate, and similar businesses can show some pretty non-normalized financials.

Josh: Quality of backlog is one of the biggest requests we get, and it can hold a deal up. You realize a company has burned through much of its revenue recognition, earnings look great, and you are not sure what is left that you are buying. Suddenly it is deal day and there is not much on the runway for the next 90 days. That is a request we often add to the back end of construction contractor reports.

Chapter 15: Preparing 12 to 24 Months Ahead

Fran: For sure. Steven, what other areas should sellers prepare 12 or 24 months before going to market?

Steven: The classic one we have all heard is books and records. It gets right back to the fundamentals. How are your books and records prepared? Who is your bookkeeper? Is it in-house, or do you hire an outside firm? How are your tax returns prepared, and how well do they match? Sometimes you see a tax return on one side and the P&L on the other, and something does not line up. Getting your books and records in very good shape is worth the time and effort before you go to market. If you are not ready, step back and find an organization that can get those documents in good shape, because whether your buyer gets a bank loan or it is a cash purchase by a large company, there will be a team of people reviewing your financials.

Steven: If they are not in good shape and you put a bad foot forward, people start wondering what else needs a closer look. Books and records come first. Without them, how could Josh even do a QoE, and how could I as a business broker do a valuation when I know the numbers are not reliable?

Fran: I think Josh would concur. There is a long list of items requested to do a quality of earnings report, and your records need to be relatively complete to do it.

Chapter 16: How QoE Findings Can Affect Financing

Fran: Ryan, can a borrower lose financing based on QoE findings?

Ryan: I think the answer really depends on the seller, since the QoE is more a reflection of the seller and, as Steven said, their record keeping, bookkeeping, and accounting practices. Let's say the QoE negatively impacts the valuation, and the valuation goes down. Now the seller has a decision to make. Some sellers are at a point in life where they are ready. They are not going back. They are already planning their destination vacations, and they will say, "It is what it is." Others will say, "This was more of a dry run, and now I know what to improve." So it depends on whether the seller is willing to recalibrate the value if the QoE comes back lower.

Chapter 17: Keeping Deals on Track With a Strong LOI

Fran: Melissa, do you see an impact on the cadence of these deals if there is back and forth after a QoE analysis?

Melissa: I would expect some deals may go sideways, and it will depend heavily on whether the LOI addresses these issues up front. Ideally, you run through the potential scenarios: what happens if it is this, what happens if it is that, and what happens to the transaction. If the LOI has a good framework to address those what-ifs, the transition is smoother and more seamless. But if the parties handled the LOI on their own, or, no offense, Steven, the broker handled it and the attorneys were brought in after the fact, and it is silent on this issue, that is when we will see a lot of tug of war.

Steven: That is actually a great point. You could set a floor in the LOI. You have that conversation with the seller first, even if he is on a beach someplace: if the price goes under a certain number, I do not want to do the deal. That saves everyone a lot of time and heartache, because we know what we can and cannot work with.

Chapter 18: Hypothetical: A $6 Million Manufacturing Acquisition

Fran: For our listeners, we are going to walk through a hypothetical situation from each of your areas of expertise. A manufacturing company is being acquired for $6 million and is seeking SBA financing. What is the first issue each of you would evaluate? I'll start with Josh.

Josh: Six million dollars? Then we definitely need a quality of earnings. I would start with what Steven said: books and records, and whether they can be supported. There is a number already out there, and it has layers to its composition. So get to the bottom of that, tie everything back that we can, see what is missing, challenge what is there, and maybe we will agree.

Fran: And Steven?

Steven: On this deal, we have a company being sold for more than the SBA loan cap. Five million dollars is the maximum a buyer can borrow. Ryan, correct me if that has changed, but I believe it is still $5 million, assuming no real estate, just the business. So a broker will look at the buyer's equity injection. There are rules in the new SOP about equity injection. The buyer will need to bring in at least a million dollars to get the loan down to $5 million, and maybe more, to obtain the loan. Within the 10 percent equity injection, there are rules about how much must come from the buyer and how much can come from other sources, and Ryan can speak to that more precisely than I can. We will also look at how much earnest money the buyer will put down. On a deal like that, sellers will want to see a substantial amount of money up front, often a minimum of 20 percent.

Fran: Ryan, do you have thoughts about that?

Ryan: As already mentioned, the first step is reviewing the normalized, recurring profitability of the company. Steven hit on another area I would look at immediately, which is the personal liquidity of the sponsor. On a transaction of this size, with a $6 million purchase price, we will have a QoE. There is also something called a pari passu structure, and a few lenders across the country will close one. Very simply, a pari passu is where a lender closes the $5 million tranche with an SBA loan and layers a conventional loan with the same bank that mirrors the terms of the SBA loan. There are well-known lenders who will go up to $9 million.

Ryan: The costs start stacking: the $6 million purchase price, fees, and working capital. Since the other points I would look at first were already covered, great job, the area I would focus on most is the working capital required. Lenders have told me internally that working capital is going to be heavily scrutinized going forward. Combine the QoE requirement at $3 million with liquidity. As Steven said, 5 percent is typically the minimum injection from the buyer, but lenders like to see post-closing liquidity from the borrower of about 7 percent of the loan amount. So the buyer, or buyers, will need very strong personal balance sheets.

Fran: Wow. Melissa, thoughts?

Melissa: I approach it from the legal standpoint: what do we need in the LOI to protect, I assume, the seller here? The biggest issue, knowing this will be funded with an SBA loan, is addressing the QoE requirement and making sure we have a set mechanism or framework for what happens if it comes in too low, including where the seller is willing to walk away from the transaction.

Chapter 19: When a QoE Comes In Higher

Fran: From time to time, QoEs come in higher. Do you think sellers can renegotiate the purchase price upward?

Ryan: It would depend on the liquidity, and if they do, it would probably be through a contingent seller note. If the QoE merits a higher valuation, I think that would be acceptable.

Fran: It is a creative solution. It gets to the deal, and everybody is happy at the end if the value comes in higher.

Chapter 20: The Biggest Misconceptions About the SOP

Fran: This SOP is really new, and we are all getting our arms around it. As Ryan mentioned, it takes effect October 1, only about two weeks from now. What is the biggest misconception you are hearing about the SOP? Melissa?

Melissa: That it is just a lender issue and does not really impact the parties, as if it is an internal lender matter.

Fran: Interesting. Ryan, what are you hearing?

Ryan: It's interesting. There are so many SBA loan commentators, and when this was issued, LinkedIn and X were full of people trying to be first to explain what it meant. Most of them were pessimistic. In some ways they are right, and in others they are wrong. I think the biggest misconception is that this somehow tarnishes the SBA loan program. I think it streamlines the process for lenders and gives both sellers and buyers a higher integrity process. As Steven alluded to, we will see an exit of searchers and search funds coming in with very little equity of their own and a band of investors behind them. I think they will largely go away. We will be working with what I call adults: people with experience who have navigated adversity, with strong personal balance sheets and great credit. The line will get shorter, but those buyers will come to the front of it.

Fran: I love that. Josh?

Josh: I have seen a lot of discussion about how the independent financial professional will be defined. It could go a couple of ways. Some people wonder whether large CPA firms will start working on deals much smaller than they are accustomed to, because many local firms do not really do this work. They prefer audits and tax returns under defined standards. With a quality of earnings, you need a foot in two lanes. You need the strong background of an auditor, and you also need to be deal and strategy oriented like a CFO. So one question is whether CPA firms will bring CFOs onto their teams to do more quality of earnings work. Another is whether it becomes so commoditized that it turns into an AI and offshore labor product where you type in numbers and 80 percent of the report comes out, which could dilute the quality of the report and how much you can rely on it. I think it will come down to the lenders, since each has different risk considerations. I'm curious to see how they define the independent financial professional and who they choose to work with.

Fran: Time will tell. And of course AI is a constant conversation in all of our work. Steven, what are you seeing as the biggest misconceptions?

Steven: Most everybody has focused on the QoE, just as we have today, because it is a big one. But as Ryan said earlier, on larger deals, for the most part, we were already doing them. Most strong banks already required a QoE as part of their process. Now it is up front and codified, so we can tell buyers and sellers, "These are the rules, and this is how it will work." Josh raised the question of who will perform the reports and how that will sort itself out. But I really believe this strengthens the opportunity to close deals for both buyers and sellers, because it removes many of the searchers and search funds that came into deals with very little equity, which frankly consumed a lot of time and energy for deals that were not going to get through the process. We will have stronger buyers and better prepared sellers. When this all settles, I believe the percentage of deals that close will improve and the transactions will be much sounder.

Fran: I think as professionals we will all feel better about deals, because we will have more confidence in the working capital requirements, what our sellers are selling for, and what our buyers are getting into, since we sit on both sides of those transactions. It adds a level of integrity to the process. I agree with you, Ryan. I think it sets our M&A market, and what we do for a living, up for greater success. We will have better closes, better educated sellers and buyers, and legal professionals preparing us for the various outcomes of a QoE. I think it is a win. Good for the SBA, even though some lenders have exited SBA lending along the way.

Chapter 21: Looking Ahead One Year

Fran: I have shared my thoughts on what the market will look like a year from now, and you have all shared yours as well. I would love one parting thought from each of you: a year from now, how do you think this SOP will impact the lower and middle market M&A environment? Ryan, go first.

Ryan: I'm weighing whether to say there will be fewer deals, because, as Steven said, many buyers who came in expecting to buy businesses with no money ultimately did not get to the finish line. But I also know many of them did. So my prediction is that there will be fewer transactions closed in lower middle market M&A using the SBA 7(a), but they will be higher quality. We have seen default rates start to tick up recently, and I would expect them to come back down and align more closely with historic norms.

Fran: Melissa?

Melissa: I would say it will lengthen the process of getting these transactions to closing. And I think we will see more sellers doing their own QoE before going to market, which Steven talked about earlier. That will give them more confidence in their numbers and their purchase price. But it will add time, because after they do that, they go to market, and then there is the independent QoE. So it will lengthen the entire transaction process.

Fran: Josh, how do you see this impacting the market?

Josh: Maybe I'm biased, but I think it will add quality to smaller deals. We may see a lot more offers coming in at $2.9 million to avoid the requirement, or buyers purchasing carve-outs at $2.99 million each, some creative structures around the threshold. Otherwise, it could extend timelines, with more refreshes, because a QoE is a sprint. It has to be timely. If it takes 60 days because books and records are not ready, that adds another layer to getting a deal done. It is good for the quality of the number, but sometimes you just need to make a decision and do the deal, so you need to be ready. For us at PBO, I see a lot more QoE preparation on the sell side. That will be a big deal.

Fran: And Steven?

Steven: Start with this premise: there are more buyers in the market than good quality businesses for sale. The good businesses will sell and move along just fine. I truly believe that. Will deals take a little more time over the next year as this settles? Yes, I think so. The more marginal deals Ryan mentioned will be more challenging, and I think the solution for many of them will be more seller financing. Sellers will need to be prepared to carry some paper, whether or not there is an SBA loan involved. That is a conversation we will be having with sellers. When a seller says they do not want to carry paper, we will say, "You may need to, so let's talk about it now." I think we will see more of that over the next year.

Closing

Fran: Awesome. A huge debt of gratitude to all of you: Melissa Bustarde with Branfman Mayfield Bustarde & Reichenthal, Ryan Smith with ThinkSBA, Steven Hanson with Transworld Business Advisors, and Josh Siler with PBO Advisory Group. We appreciate you sharing your wisdom with us today. Good luck, happy deal making, and have a great day.