Quality of earnings
From Baratelli Credit Services, for lenders, buyers and sellers.
An independent review of a business's earnings: every add-back tested against the general ledger, the revenue proved to the bank deposits, and the earnings a lender can rely on, with the support for each number.
SBA SOP 50 10 8.1, in force since October 1, 2026: a change-of-ownership 7(a) loan with a purchase price of $3 million or more needs a quality of earnings report from an independent provider, ordered by the lender. It must include a proof of cash for the trailing twelve months and the last two fiscal years, and the lender uses its earnings for debt service coverage. A report the seller commissions does not qualify.
How it works
- Engage. The client signs our engagement letter; we confirm independence from the buyer, the seller and the company in writing.
- Intake. The company uploads through a private, encrypted link: general ledger, bank statements, sales by customer, payroll and agings. Any accounting system works, and owners on Baratelli Bankable send it all in one click.
- Testing. Every seller add-back tested against the ledger; personal charges, year-end cut-off, manual entries and wages against Forms W-3 tested; deposits proved to revenue; customers, working capital and debt-like items measured.
- Report. A US CPA reviews every report. The client receives the report, an Excel workbook with live formulas, and the signed management representation letter.
Fee and turnaround
| Purchase price | Turnaround | Fee basis |
|---|---|---|
| Up to $3 million | 15 business days | Fixed, quoted from the document list |
| $3 million to $6 million | 15 business days | Fixed, quoted from the document list |
| Over $6 million | 15 business days | Fixed, quoted from the document list |
The fee is fixed and is quoted in writing from the document list before any work starts. Half on signing, half on delivery. It never depends on whether the transaction closes or on what the report finds. Turnaround runs from complete information.
Who it is for
- Lenders: the QoE SBA requires, ordered by you and prepared for your credit decision.
- Buyers: the earnings behind the price, before you sign.
- Sellers: a sell-side review before you go to market. It does not replace the lender's QoE, but it finds the issues first. Start with the free Sale readiness check in Baratelli Bankable.
Ask for the Delta Fastener sample report and workbook: Philip A. Baratelli, CPA · philbaratelli@gmail.com · 904-846-3011.