Sellers looking to cash out after 1 great year....

March 04, 2026

by a searcher from Hofstra University - Frank G. Zarb School of Business in Miami, FL, USA

I have been searching for a few months now and recently...I think start of 2026, I have seen several CIM's with 2025 financials being great and in the range I am looking for. Once the CIM hits the previous years SDE are nearly 40-50% lower than 2025 and the sellers want their premium to exit. I mostly walk away from these deals as 1 great year does not call for a higher selling price because they spoke to a broker. I wanted to see if I am looking at this correctly or this is normal in this space? I guess if I was to pull the trigger on a deal like this, I would need to allow for higher reserves. Also how does SBA and banks look at this? Do they take an average for DSCR or just use the 2025 numbers? Thoughts?

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Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

From a lenders perspective, we see this situation often. Most lenders will not lend off of one year alone, so it can be a challenge to secure financing. However, there are cases where you can get a deal done here if you are comfortable. Here are some options you can use: 1) Typically if you have one good tax year and another six months or so of the next year and a trailing 12-months that support the loan, often lenders will get comfortable with supporting the higher purchase price despite the fact the business would not cash flow in earlier periods. 2) If a business has been experiencing very consistent growth from year-to-year, then sometimes lenders will get comfortable lending off of just one year of cash flow. There are limited lenders that will consider this though and you really cannot have other risks in the deal like large customer concentrations. 3) You can use forgivable seller notes to get the seller to the purchase price they want but to provide for cash flow sufficient to support the senior debt at least in the previous year as well as the current year. We have a lot of experience helping buyers craft forgivable seller notes to meet this person. The beauty of this option is that it also provides you with protection should revenues or cash flow fall off in future years. If you would like to discuss options or ever look at some creative ways to structure a transaction, I would be happy to connect. You can reach me here or directly at redacted We also offer a free review of deals and can help advise on what offers may or may not work. Good luck with your search.

Reply by a searcher
from Bowling Green State University in Surrey, BC, Canada

Four words - reversion to the mean That said, you don't want to have to walk from all opportunities in the wake of a good year. That's where VTBs and earn-outs come in - bridge the gap between good-year premium and, say, 3-5year average. Up here in Canada, a lender did a study of change-of-ownership deals and found that ~75% experienced flat to down earnings in the two years following a transition - plan your capital stack accordingly.

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