For SBA lenders
Short answer
A significant revenue decline necessitates a deeper analysis into its causes, whether it's a temporary issue, market trend, or indicative of systemic problems, to determine future viability and repayment ability.
Prudent lending standards require lenders to understand the underlying reasons for financial performance changes. The lender must obtain detailed explanations from the seller and buyer, and corroborate them with industry data, customer concentration analysis, and projections to assess if the business can generate sufficient cash flow post-acquisition.
An acquisition target shows a 25% revenue drop in the last 12 months. The lender investigates whether this was due to a lost major client (and if they can be replaced), a temporary supply chain issue, or broader industry contraction. If attributable to non-recurring events and a strong rebound is projected, it might be acceptable with robust justification.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
7(a) Loan Program — Terms, Conditions, and Eligibility
U.S. Small Business Administration · Official SBA source
SOP 50 10 - Lender and Development Company Loan Programs
Last checked 2026-06-13. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-13 · SBA sources checked through 2026-06-13. DealRoom analysis of public SBA 7(a) lending records (FY2020–present). Grounded in the current SBA rulebook; verify against the official sources above before relying on it for a live deal. Not legal, tax, or financial advice, and not an approval decision.
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