Every diligence request list assumes the documents exist. In a lot of small businesses, they do not.

The seller is not always hiding something. Often the business simply grew up on a checkbook, a handshake, and a bookkeeper who comes in twice a month. But a missing document is still a missing fact, and the buyer pays for every fact he cannot prove.

This week we walk one deal through three gaps the seller could not fill, and show how the buyer closed each one.

This is a composite deal built from transactions we have worked on. Names, locations, and figures are changed.

Business: Commercial janitorial and facility cleaning company in the Mid-Atlantic

Customers: Office buildings, medical offices, and light industrial sites, most cleaned at night

Team: 58 employees on day and supervisory shifts, plus four subcontracted night crews

Owner: 19 years running it, ready to retire

Asking price: $3,800,000

Revenue per the books (last fiscal year): $5,900,000

SDE per the listing advisor: $1,000,000

Implied multiple: $3,800,000 ÷ $1,000,000 = 3.80x SDE ✓

Financing: SBA 7(a)

The buyer signed an LOI with 60 days of exclusivity. Then he sent the request list.

Under SBA SOP 50 10 8.1, in effect since October 1, 2026, a purchase price of $3 million or more requires a Quality of Earnings report. The lender orders it, and it is prepared for the lender. It must include a proof of cash covering the trailing twelve months and the last two fiscal years: every dollar of reported revenue tied to the bank, and every dollar of expense tied to money actually going out.

Three weeks in, the QoE firm told the lender it could not complete that proof. A QoE is a financial review, not operational diligence, and it can only test what it is given. The lender would not issue a commitment until the proof was done.

Here is what was missing.

The fix: a bank-statement proof of cash. The buyer's accountant pulled 36 months of statements for all three accounts and tagged every deposit by source.

Total deposits, all accounts, last fiscal year: $6,046,000

Owner loans deposited: ($120,000)

Transfers between company accounts: ($86,000)

Customer receipts proven: $5,840,000 ✓

The books showed $5,900,000. The $60,000 difference was owner loans and transfers booked as sales.

The same work on the outflow side found $84,000 of cash withdrawals last year that the listing called owner draws. The seller said most of it paid crew leaders for extra shifts and supplies. With no receipts, the QoE treated it as an operating cost, not an add-back.

With that schedule, the QoE firm could finish its proof of cash.

Most of the night cleaning was done by four subcontracted crews.

The fix: the buyer interviewed all four crew leaders, with the seller present, and asked for their own business records.

Two crew leaders ran real businesses. Each had an LLC, workers' compensation and liability insurance, and other clients. They produced certificates of insurance within a week.

The other two worked only for this company. They used its supplies and equipment and worked schedules it set. Under the IRS common-law test, which looks at behavioral control, financial control, and the relationship of the parties, that pattern points toward employees, and several states apply stricter tests of their own.

That creates two problems. Going forward, those crews cost more once they are on payroll. Looking back, there is possible exposure for payroll taxes and, if a subcontractor cannot show its own coverage, workers' compensation premium that an insurer's audit can charge back to the company.

The two dependent crews were paid $552,000 last year. Putting them on payroll adds employer Social Security and Medicare at 7.65%, plus an illustrative 4.35% for unemployment insurance and workers' compensation:

Added payroll cost: $66,240 a year ✓

Hiring both crews onto payroll at closing became a closing condition. The past exposure went into the purchase agreement as a specific rep and indemnity, backed by an escrow.

A handshake is not an asset you can buy. With no written agreement, there is nothing to assign, and nothing that says the customer has to stay.

The fix: customer calls under NDA. Near the end of diligence, with the seller's consent, the buyer and seller called all three accounts together.

Accounts A and B, worth $570,000 a year combined, agreed to sign new written service agreements with the buyer's company, effective at closing. Signing became a closing condition.

Account C, worth $210,000 a year, or 3.6% of revenue, would not sign before closing. It planned to rebid its cleaning in the spring.

Outside SBA, a buyer might cover that risk with an earnout. SBA loans prohibit seller earnouts, so Account C was covered by a specific rep that no customer had given notice of leaving, backed by the escrow. The buyer accepted the rest of that risk at the lower price.

SDE per the listing advisor: $1,000,000

Revenue overstated by loans and transfers: ($60,000)

Cash withdrawals with no receipts: ($84,000)

QoE-verified SDE: $856,000 ✓

Two night crews onto payroll: ($66,240)

Real SDE for the buyer: $789,760 ✓

At the asking price, that is 4.81x real SDE ✓, not 3.80x.

The lender's test used the QoE number. With a $120,000 salary for the new owner, the lender underwrites $736,000. On a $3,674,700 SBA loan (10 years, illustrative 9.75%, with 3.5% closing costs and $150,000 of working capital in the project), debt service is $576,650 a year:

Lender DSCR at asking: $736,000 ÷ $576,650 = 1.28x ✓

Buyer DSCR at asking, with the crews on payroll: $669,760 ÷ $576,650 = 1.16x ✓

The bank might have approved it. The buyer would have been living just above the line.

The buyer went back to the seller with the proof of cash, the crew interviews, and the customer calls. He used the seller's own multiple: 3.80x applied to real SDE is $3,001,088. They settled on $3,000,000.

Price: $3,800,000 → $3,000,000 (3.80x real SDE ✓)

Escrow: none → $150,000 from the seller's proceeds, held 24 months, sized above two years of the avoided crew payroll cost ($132,480). Payroll tax can be assessed for about three years, so the seller's indemnity was set to outlast the escrow.

Reps and indemnity: standard → specific reps on worker classification, payroll taxes, and customer relationships, with a seller indemnity

Closing conditions: standard → signed agreements with Accounts A and B, two crews hired onto payroll, certificates of insurance from the two independent crews

Timeline: 60 days → 105 days (a 45-day extension of exclusivity)

The financing changed with it:

Buyer equity: $408,300 → $325,500

SBA loan: $3,674,700 → $2,929,500

Annual debt service: $576,650 → $459,710

Lender DSCR: 1.28x → 1.60x ✓

Buyer DSCR with the crews on payroll: 1.16x → 1.46x ✓

The buyer pays $116,940 a year less in debt service. At $3 million the QoE requirement still applied, and this time it finished.

The deal closed on day 105. The seller took $2,850,000 at closing, with the balance in escrow. He did not love the number. But every cut was tied to his own bank statements, his own crew leaders, and his own customers.

Missing documents do not kill most deals. Ignoring them does.

Each gap had a way to rebuild the fact: bank statements for the books, interviews and insurance certificates for the crews, direct calls for the accounts. What could not be proven became a price change, an escrow, a rep, or a closing condition.

The worst move is to accept "we don't have that" and keep going at the original price. That is how buyers end up paying 4.81x for a business they thought cost 3.80x.

This company was easy to find. It had long-standing customers, a retiring owner, and a reasonable asking multiple.

Deal sourcing is the easiest part of buying a business. Due diligence is where you find out what you are actually buying, and it is where buyers win or lose the most money. That is the work we do every day.

Is a seller telling you a document "doesn't exist"?

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