Quality of Earnings Reports

A QoE report is an independent financial due diligence analysis of the reliability, sustainability, and accuracy of a business's earnings. For SBA purposes it reconciles the accountant-prepared financial statements, tax returns, internal statements, and IRS transcript data into a normalized, adjusted earnings figure, and includes a Cash Proof.

Under SOP 50 10 8.1 (effective October 1, 2026), a QoE is required for Initial Acquisition and Business Expansion transactions with a Business Purchase Price of $3 million or greater, in addition to the business valuation. The threshold is measured before buyer equity, seller debt, or other financing sources. Owner Buyout and ESOP & Cooperative transactions are exempt.

An independent, experienced financial professional, engaged for the benefit of the lender. The report may not be prepared by or for the borrower or the seller.

A financial analysis that reconstructs cash receipts and disbursements from bank statement data and reconciles that activity to the income statement and tax returns. Under SOP 50 10 8.1, the Cash Proof must cover the trailing 12-month period and the last two fiscal years.

Sometimes. SBA training on 8.1 indicates a buyer's QoE plus a reliance letter may be furnished to the lender, with the lender engaging its own QoE professional to review the work and determine whether it can be relied upon. Note that most buy-side reports contain non-reliance language, so reliance must be specifically extended by the original provider. BGH performs these lender-side reviews.

The out-of-pocket cost of financial due diligence reports may be passed on to the borrower, and amounts the applicant spends on them can count toward the equity injection.

Yes, under a single engagement, with one data request and consistent earnings across both reports.

Contact BGH Valuation Services with your transaction details and our team will confirm scope, documentation requirements, and timing, and issue an engagement letter for your file.