{"ok":true,"canonical_url":"https://dealroom.so/for-lenders/questions/what-if-a-significant-portion-of-the-business-s-historical-revenue-came-from-a-single-conc","api_url":"https://dealroom.so/api/public/questions/what-if-a-significant-portion-of-the-business-s-historical-revenue-came-from-a-single-conc","question":"What if a significant portion of the business's historical revenue came from a single, concentrated customer that will not transfer to the new owner?","topic":"Change-of-ownership underwriting","audience":"lender","bot_mode":"lender","short_answer":"If a significant portion of historical revenue came from a concentrated customer that will not transfer, the lender must critically assess the business's projected cash flow, potentially adjusting projections downward, and ensure the buyer has a credible plan to replace that revenue.","rule":"Prudent lending requires analyzing the sustainability of revenue streams. A substantial loss of a key customer post-acquisition materially impacts future cash flow and the business's ability to repay the loan. The lender must ensure the business can service the debt based on realistic, post-acquisition projections.","example":"A business being acquired for $1,000,000 historically generated 40% of its revenue from one large corporate client, which has stated it will not work with the new owner. The lender must significantly discount historical revenue in their projections, require the buyer to provide a detailed plan for new customer acquisition, and ensure the revised projections still support debt service.","what_lenders_check":"Lenders must identify customer concentration risks during due diligence. Overlooking or inadequately addressing the loss of a major customer can lead to unrealistic projections, poor loan performance, and ultimately a default, reflecting a lack of prudent underwriting.","required_facts":["Customer concentration","Revenue loss","Cash flow projections","Buyer's plan","Prudent lending"],"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":"Indemnification from the Seller","url":"https://dealroom.so/glossary/indemnification-from-the-seller"},{"term":"Substitution of significant collateral","url":"https://dealroom.so/glossary/substitution-of-significant-collateral"},{"term":"Concentrated risk","url":"https://dealroom.so/glossary/concentrated-risk"},{"term":"Alienate the Business","url":"https://dealroom.so/glossary/alienate-the-business"},{"term":"Revenue","url":"https://dealroom.so/glossary/revenue"},{"term":"Unguaranteed portion","url":"https://dealroom.so/glossary/unguaranteed-portion"}],"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/what-if-a-significant-portion-of-the-business-s-historical-revenue-came-from-a-single-conc","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."]}