Would you still get a QoE report if the seller provides 90% financing?

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November 16, 2024

by a searcher in San Jose, CA, USA

My take is that a 90% seller note already de-risks the transaction substantially. Of course, due diligence is still essential. However, I also want to weigh the overhead of a three year QoE on a Sole Proprietorship vs. the risks of killing the deal with what may be considered by the owner as too much overhead.

Deal $1,8M on $600K SDE (to be verified).

I don't want to skimp on important steps so looking for additional perspectives for this community.

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Reply by a professional
from University of Massachusetts at Lowell in Chicago, IL, USA
A Quality of Earnings (QoE) report is an invaluable tool for investors, regardless of financing structure, to make well-informed decisions. By offering a thorough and objective analysis of a company's financial performance, it uncovers critical insights often hidden in internal or even reviewed financial statements, such as unsustainable earnings or accounting irregularities. A QoE report also identifies potential risks and opportunities, providing investors with the confidence to proceed with a clear understanding of the asset. If you'd like to explore how a QoE report can support your investment decisions, feel free to reach out at redacted
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Reply by a professional
from University of Pennsylvania in San Francisco, CA, USA
Thanks for the tag, ^redacted‌! I'd recommend a QoE even if the seller note is non-recourse and only goes into default if the company earns enough to pay it and doesn't. Why? As an owner-operator, this business could take several years of your life even if you can "just walk away". As an investor, the business will take up your attention and will need to be considered for portfolio mix purposes. Either way, an acquisition represents huge non-financial opportunity costs in addition to the financial ones.
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