{"ok":true,"canonical_url":"https://dealroom.so/for-lenders/questions/if-the-business-i-m-buying-has-a-temporary-decline-in-revenue-during-the-due-diligence-per","api_url":"https://dealroom.so/api/public/questions/if-the-business-i-m-buying-has-a-temporary-decline-in-revenue-during-the-due-diligence-per","question":"If the business I'm buying has a temporary decline in revenue during the due diligence period, will it kill the deal?","topic":"Change-of-ownership underwriting","audience":"lender","bot_mode":"lender","short_answer":"A temporary revenue decline during due diligence does not automatically kill the deal, but the lender will require a thorough explanation, analysis of the cause, and projections demonstrating a strong likelihood of recovery and repayment capacity post-acquisition.","rule":"Lenders analyze historical and projected cash flow. A recent decline requires careful underwriting to distinguish between a temporary, explainable dip (e.g., seasonal, one-time event) and a systemic problem indicating a failing business. The borrower's projections must convincingly demonstrate how they will restore profitability.","example":"A business's revenue drops 15% in Q1 due to a major road construction project impacting access. The lender would require detailed financial statements, a letter from the borrower explaining the specific impact, and credible projections showing recovery once the construction is complete, supported by market data or historical performance in similar situations.","what_lenders_check":"Lenders are concerned about underwriting a declining business. They need robust evidence that the decline is truly temporary and reversible, and that the business will generate sufficient cash flow to service the debt post-acquisition. Weak explanations or projections can lead to a deal being declined.","required_facts":["Temporary revenue decline","Due diligence","Repayment capacity","Business viability","Projections","Underwriting risk"],"source_families":["SOP 50 10 - Lender and Development Company Loan Programs","13 CFR Part 120 - Business Loans"],"official_sources":[{"title":"SOP 50 10 - Lender and Development Company Loan Programs","url":"https://www.sba.gov/sites/default/files/2025-05/SOP%2050%2010%208%20Technical%20Updates%20effective%206.1.2025.docx"},{"title":"13 CFR Part 120 - Business Loans","url":"https://www.ecfr.gov/current/title-13/chapter-I/part-120"}],"related_questions":[{"question":"How does a lender evaluate the reasonableness of a business purchase price when the seller note is fully subordinated?","url":"https://dealroom.so/for-lenders/questions/how-does-a-lender-evaluate-the-reasonableness-of-a-business-purchase-price-when-the-seller"},{"question":"What are the specific requirements for valuing inventory and equipment in a business acquisition for a 7(a) loan?","url":"https://dealroom.so/for-lenders/questions/what-are-the-specific-requirements-for-valuing-inventory-and-equipment-in-a-business-acqui"},{"question":"When is an independent business appraisal mandatory for a 7(a) loan financing a business acquisition with a purchase price over $500,000?","url":"https://dealroom.so/for-lenders/questions/when-is-an-independent-business-appraisal-mandatory-for-a-7-a-loan-financing-a-business-ac"},{"question":"How does the SBA view a change of ownership where the new owner has no prior industry experience?","url":"https://dealroom.so/for-lenders/questions/how-does-the-sba-view-a-change-of-ownership-where-the-new-owner-has-no-prior-industry-expe"},{"question":"Is an independent business appraisal required for a 7(a) loan financing a business acquisition with a purchase price exactly $500,000?","url":"https://dealroom.so/for-lenders/questions/is-an-independent-business-appraisal-required-for-a-7-a-loan-financing-a-business-acquisit"},{"question":"When must a lender require an independent business valuation for a change of ownership 7(a) loan, and what are the specific thresholds?","url":"https://dealroom.so/for-lenders/questions/when-must-a-lender-require-an-independent-business-valuation-for-a-change-of-ownership-7-a"}],"related_terms":[{"term":"Due diligence","url":"https://dealroom.so/glossary/due-diligence"},{"term":"M&A advisor","url":"https://dealroom.so/glossary/ma-advisor"},{"term":"Operational due diligence","url":"https://dealroom.so/glossary/operational-due-diligence"},{"term":"Legal due diligence","url":"https://dealroom.so/glossary/legal-due-diligence"},{"term":"Inadequate due diligence","url":"https://dealroom.so/glossary/inadequate-due-diligence"},{"term":"Heightened due diligence","url":"https://dealroom.so/glossary/heightened-due-diligence"}],"related_tools":[{"name":"SBA 7(a) payment & fee calculator","url":"https://dealroom.so/sba-7a/calculator"},{"name":"Find an active SBA 7(a) lender","url":"https://dealroom.so/lenders"}],"data_freshness":{"last_reviewed":"2026-06-13","sba_rule_sources_checked_through":"2026-06-13"},"citation":{"label":"DealRoom.so SBA 7(a) Q&A","url":"https://dealroom.so/for-lenders/questions/if-the-business-i-m-buying-has-a-temporary-decline-in-revenue-during-the-due-diligence-per","source_type":"DealRoom Q&A"},"caveats":["Grounded in the current SBA rulebook; verify against official sources before relying on it for a live deal.","Not legal, tax, or financial advice and not an approval decision."]}