{"apiVersion":"2026-10-19","data":{"disclaimer":"Educational. Not legal, tax, or financial advice.","resource":{"slug":"red-flags","title":"Red flags in a small-business deal","audience":"buyer","summary":"What to slow down for, before you write a letter of intent.","citations":[{"label":"SBA 7(a) loans","url":"https://www.sba.gov/funding-programs/loans/7a-loans"},{"label":"IRS Publication 334","url":"https://www.irs.gov/publications/p334"},{"label":"IRS Publication 544","url":"https://www.irs.gov/publications/p544"},{"label":"SCORE","url":"https://www.score.org/"}],"body":"This is educational. A red flag is a question, not a reason to accuse someone, and not legal or accounting advice.\n\n## The numbers do not match\n\nTax returns and internal statements that tell different stories. Add-backs with no receipt. A one-time expense that shows up every year. Owner pay that is not on a payroll record. IRS Publication 334 is a starting point for what a small business reports. It is not the seller's return.\n\n## One customer, or the owner, is the business\n\nA customer large enough that their leaving changes the company. Contracts that are oral. The owner is the estimator, the salesperson, and the person the landlord calls. Ask who runs a week. If the answer is a name you have not met, ask to meet them before the letter of intent, under the NDA.\n\n## The premises and the license\n\nRent to a relative, above or below what a stranger would pay, with no appraisal. A lease that cannot be assigned, or that ends before you would earn the price back. A license, a permit, or a carrier authority in the owner's personal name. A buyer cannot close what the landlord or the agency will not transfer.\n\n## The price\n\nA multiple with no earnings bridge. Real estate mixed into the business price so the multiple looks normal. Working capital left undefined, so the peg becomes a fight at the end. Seller financing described in a sentence and not in a note. An earnout that the SBA lender may not allow. The current SOP 50 10 is what the lender applies. A 2023 procedural notice said seller earnouts were prohibited on 7(a) change-of-ownership loans. Do not assume the notice you remember is the rule on the day you apply.\n\n## The process\n\nA seller who will not let your accountant see the bank statements. A broker who will not say how they are paid. A request that you waive diligence to \"keep the deal moving.\" Speed is not a term. Your lawyer and your CPA are the people who tell you which of these flags are fatal. This list does not."}}}