What causes deals to fall through?

February 24, 2026

by a searcher from University of Texas at Austin in Houston, TX, USA

Hey everyone, It seems as though one of the things that causes the search process to take so long is that deals fall through in the process requiring searchers to start all over again. I’m curious to know some common reasons deals fall through to see if there’s a theme (to be able to identify deals likely to fall through earlier). Please share your experiences!

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

I would say the biggest reasons we see deals fall apart from a lender perspective are as follows: 1. QofE comes back showing some major discrepancies that change the cash flow and the buyer and seller fail to negotiate a change in price. 2. The financials of the business deteriorate post-LOI. This could be because the seller has taken their eyes off of the business while planning for a sale or because there is a change in the industry. But this can cause problems with the financing or a need to adjust price, and the seller might not be willing to make the adjustment. 3. Issues come up in contract negotiations related to Reps and Warranties, seller salary post-closing, disagreements on working capital adjustments, etc. 4. What I will call the "Out of Nowhere". There are situations where often the seller backs away for some surprise reason. I have seen these reasons be things like: a) they talk to their accountant and find out after taxes they are not getting as much as they wanted so they back out; b) the attorney is bad and talks them out of moving forward; c) they get a better offer and try to find a way to kill the existing deal; d) a friend or associate tells them they can get more for the business so they back out; and e) they just decide they are not ready to sell yet. There is are many other reasons I have seen deals not move forward, but the above covers the primary causes I run into. We do commercial lending and we rarely see a deal fail on our end due to a loan issue, but that is because we vet transactions pretty hard on the front-end. But that is a possibility if you are only using one lender or the wrong lender. If you have any additional questions you can reach me here or directly at redacted

Reply by a lender
from Touro University in Houston, TX, USA

You gotta keeps your eyes peeled for Red flags. I posted this a while ago on social. Searchers: Bookmark this post if you plan on using SBA 7(a) to finance your acquisition. Here are some Red flags to look out for when reviewing CIMs and dealing with sellers and their brokers: - CIM doesn't use the most 3 years of filed tax returns as a baseline for determining EBITDA/SDE - CIM touts the future with minimal focus on the past - CIM or broker throws historical multi year averages at you - CIM has tons of addbacks but doesn't give insight into the breakdown - Broker/seller provides historical financials and analysis but refuses to provide returns - Broker/seller provides everything but is dragging out the request for the returns - CIM and broker focuses on TTM or YTD activity primarily - Business broker is a jerk (big one 😂) - Business broker insists you provide a bank preapproval (not even sure wtf this is tbh) before they provide ANY information - CIM touts the brokers SBA preapproval letter which is not worth more than its weight in salt. - CIM discusses the SBA preapproval letter and describes how it passed a rigorous process to get the letter. - Business broker holds your LOI hostage until you agree to use their lender - Business broker tells you seller is hands off and business is on autopilot. Rarely true. - If deal fell out of contract, keep those antennas up. Don't believe a broker when they say a deal was a week away from closing but the buyer couldn't come up with the equity injection. Keep in mind these are just Red flags. If there are a couple, dig deeper. If there are too many, it may be time to step away. Have any more to add to the list? There def are plenty more.

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