What a Quality of Earnings report looks like — and what it costs

What a Quality of Earnings report is

A QoE is not an audit and not a valuation. An audit asks whether financial statements comply with accounting standards; a valuation asks what a business is worth. A QoE asks the only question a buyer actually has about the numbers: is this profit real, and will it still be there next year when I own it?

It is prepared by a CPA or transaction-advisory firm, on a specific deal, for whoever engages it. Buy-side reports are commissioned by the buyer; sell-side reports are commissioned by the seller before going to market. They cover similar ground, but a report prepared for the person selling to you is a document you read carefully rather than a document you rely on.

What is inside one

The deliverable is a report of substantial length, but the work behind it is a fairly standard set of procedures. Knowing their names is enough to read any QoE and to ask a firm what it did and did not do.

The output that matters is a single number with a trail behind it: adjusted EBITDA — or, on owner-operated businesses, adjusted SDE — together with a schedule of every adjustment the firm accepted, reduced or rejected. That schedule is the report. Everything else explains it.

Proof of cash is not optional in every setting. Where the SBA requires a QoE (below), its own rulebook defines the deliverable: an independent report on "the reliability, sustainability, and accuracy of a business's historical and projected earnings" that must include a Cash Proof — defined there as an analysis that independently reconstructs cash receipts and disbursements by reconciling bank statement data to the income statement and the tax return, for every period reviewed. If you are buying a QoE privately, that definition is a reasonable minimum to hold a provider to.

What it costs — and why every answer is different

There is no published price list for a Quality of Earnings report. It is sold as an engagement, and the figures in circulation are quotes from the firms that sell it. That is why the ranges you find disagree so sharply — and the disagreement is the useful part, because it tells you what actually moves the number.

Two providers, both publishing 2026 figures. Note that they do not even slice the market the same way — each bracket below is the provider's own, not a common scale:

Same work in name, four times the price. The gap is not one of them overcharging — it is a different engagement:

• Scope. A flat-fee small-deal report tests add-backs and ties revenue to the bank. A full national engagement rebuilds the books month by month on an accrual basis, analyses margin by product line and coordinates with tax. On a simple owner-operated business the second may be more than the deal needs — on a business with deferred revenue and three entities, the first is not enough.
• Who signs it. If a lender has to accept the report, the name on the front page matters to them, and that name has a price.
• The state of the books. Cash-basis bookkeeping, missing statements and an add-back schedule built in a spreadsheet all add hours no matter who is doing the work.

So do not ask what a QoE costs. Ask what is in it: is proof of cash included, are add-backs tested individually, is there a monthly accrual rebuild, and will this lender accept this preparer. Two quotes that differ by twenty thousand dollars are usually two different pieces of work, and only one of them may be the one you need.

Turnaround runs from about two weeks on a small flat-fee engagement to three to six weeks with a national firm, once documents are in hand. Either way it is time you spend on a deal you have already chosen.

From 1 October 2026, the SBA requires one on larger deals

This is new, and it catches people out. SBA issued SOP 50 10 8.1 on 14 August 2026, and it applies to any application that receives an SBA loan number on or after 1 October 2026. For initial acquisitions and business expansions where the business purchase price is $3,000,000 or greater, the lender must obtain an independent Quality of Earnings report — in addition to the business valuation that was already required.

Four details decide whether a deal is caught:

• How the price is measured. The rulebook defines Business Purchase Price as the price set by the purchase and sale agreement, less the portion of owner-occupied commercial real estate being acquired, established by its appraised value. The threshold is tested before buyer equity, seller debt or any other financing is applied. So a closing that bundles a business with the building it sits in is measured on the business alone, and a deal can look larger than the threshold while falling under it.
• Which deals are exempt. Owner buyouts, ESOPs and cooperative transactions — on the stated reasoning that the existing owners keep operational knowledge of the business and the transaction does not change the management or operating structure.
• Who engages the preparer. The QoE must be performed by an independent qualified financial professional and conducted for the lender's benefit. A report prepared by or for the borrower, the seller or the business broker does not satisfy the requirement, however thorough it is. Commissioning your own first can mean paying twice.
• What the lender does with the answer — and this is the part that costs money. The lender must use the report's findings to calculate debt-service coverage, on the last fiscal year-end or an average of the last two, historical or adjusted. The floors are set by transaction type:

  Initial acquisition	1.25 to 1
  Business expansion	1.15 to 1
  Owner buyout	1.25 to 1
  ESOP and cooperative	1.25 to 1

  If that coverage does not support the valuation and the proposed debt structure, the loan amount must be reduced — and any additional funds brought in to bridge the gap must be on full standby. In plain terms: a QoE that trims the earnings figure does not just make a lender nervous, it can shrink your loan and send you looking for more of your own money, weeks into underwriting. See DSCR.

Below the threshold nothing changes — and that is where almost every Main Street deal sits. Whether to buy a QoE stays your decision.

Why most Main Street buyers never get one

It is not that the work is unnecessary. On a small acquisition a QoE is simply priced for a moment that arrives too late to help you choose.

Look at how buying actually goes. You are not evaluating one business — you are working through a list. You sign NDAs on eight or ten listings, request documents on five, and somewhere in there decide which one deserves a lawyer. At the cheapest end of the market a QoE is $5,000 to $8,000. Commissioning one per candidate is a five-figure sum spent before you own anything, almost all of it on businesses you will not buy — and at national-firm rates it is several times that. Nobody does this, and nobody should.

So the QoE goes where its price makes sense: one deal, already chosen, usually under LOI, often because a lender asked for it. By that point you have spent weeks on the business and an anchor price is already set. The report is worth its fee there — it just answers the question after the expensive decision, not before it.

Which leaves the part of the purchase where money is actually lost: the weeks when you are holding five document packets and deciding which one is worth anyone's professional time. There is no cheap way to be wrong there. Getting it wrong means either paying $20,000 to learn that a business was never viable, or skipping verification entirely and finding out after closing — which is how most first-time buyers end up in trouble.

The useful question, then, is not "do I need a QoE?" It is "what stands between zero and a QoE?" — what reads the documents you already have, on every candidate, before the professionals get involved. The three levels of checking lays out what sits where, and the document list is what any of them starts from.

When a deal does reach the QoE stage, the report earns its fee fastest when at least one of these is true:

• A lender requires it — above the SBA threshold, that decision is made for you.
• The seller's numbers and their tax returns disagree, and nobody has been able to explain why.
• The books are accrual-based and complicated enough that reading them is genuinely specialist work.
• The price is large enough that a plausible error in the earnings figure dwarfs the fee.

What a QoE cannot do

• It does not tell you whether to buy. It tells you what the earnings are. The decision stays yours.
• It is mostly blind outside the financials. The lease that will not assign, the licence that stays with the seller, the blanket lien from an old loan — a QoE is not scoped to find them, and on Main Street these kill more deals than earnings do.
• It is not a guarantee. It is a professional opinion formed from the records provided, with stated limitations. Read that section: it tells you what the firm could not verify.

1. Decide whether this deal actually needs one

   Run the four tests above. If the deal is under the SBA threshold, no lender requires it, and the books are simple, the honest answer is often no — read the documents first.

2. Ask three firms for scope, not just price

   A quote means little until you know whether a monthly accrual rebuild, proof of cash and add-back testing are all included. Two quotes that differ by fifteen thousand dollars are often two different engagements.

3. If SBA financing is likely, let the lender engage the preparer

   Above the threshold the report must come from a professional engaged by the lender. Commissioning your own first can mean paying twice.

4. Read the adjustment schedule before the narrative

   Every adjustment the firm reduced or rejected is a number the seller believed and the evidence did not support. That list is your negotiation.

5. Take the findings back to the price

   A QoE that lowers adjusted earnings changes what the business is worth at the multiple you agreed. That is the point of buying it before closing rather than after.

Questions buyers ask

What does a quality of earnings report look like?

It is a report of substantial length built around one schedule: every adjustment to earnings the firm accepted, reduced or rejected, with the evidence behind each. Around that sit the procedures — proof of cash tying deposits to reported revenue, add-back testing, revenue concentration, gross margin by line, working capital analysis, and in full-scope engagements a month-by-month accrual rebuild. It ends with adjusted EBITDA or adjusted SDE and a statement of what the firm could not verify.

How much does a quality of earnings report cost?

There is no list price, and quotes for the same size of deal differ several-fold. Specialist small-deal providers publish $5,000 to $8,000 on a $1M to $3M business and $6,000 to $10,000 from $3M to $5M; national transaction-advisory practices publish $20,000 to $35,000 under $5M and $25,000 to $50,000 from $5M to $15M. The gap reflects scope — whether the books are rebuilt month by month, how deeply add-backs are tested, and whether a lender will accept that preparer — so compare scope before price.

Is a quality of earnings report required for an SBA loan?

From 1 October 2026, on larger deals yes. Where the business purchase price is $3,000,000 or greater, the lender must obtain an independent QoE on initial acquisitions and business expansions. The price is measured before buyer equity or seller financing and excludes owner-occupied real estate. Owner buyouts, ESOPs and cooperatives are exempt. The report must be engaged for the lender's benefit — one prepared by or for the borrower, the seller or the broker does not satisfy the rule. Below the threshold it stays optional.

How long does a quality of earnings report take?

About two weeks on a small flat-fee engagement, and three to six weeks with a national firm, counted from the point where the documents are actually in hand. Incomplete records are the usual reason a timeline slips, which is why the document request goes out early even if the report comes later.

Can I get a quality of earnings report template or example?

Templates circulate, but they are of limited use: a QoE is an engagement, not a form, and what makes it worth its fee is the testing behind the schedule rather than the layout. If you want to see what the reasoning looks like on a real set of documents, read the procedures above and ask any firm you are considering for a redacted sample of their own work.

What is the difference between a QoE and an audit?

An audit asks whether financial statements comply with accounting standards, looks backwards, and is prepared for the company. A QoE asks whether earnings are real and repeatable for a specific transaction, and is prepared for whoever is buying or selling. A business can have clean audited statements and still fail a QoE, because the questions are different.

Sources

• SBA — SOP 50 10 8.1, Appendix 15: 7(a) Changes of Ownership (effective 1 October 2026) — the rulebook itself
• SBA — Information Notice 5000-880695, Issuance of SOP 50 10 8.1 (issued 14 August 2026)
• CliftonLarsonAllen (CLA) — The SBA Now Requires a Quality of Earnings on Larger Acquisition Loans
• Brady Ware — Quality of Earnings Requirements for SBA Loans
• EisnerAmper — SBA Quality of Earnings Report Now Mandatory for Larger Change-of-Ownership Loans
• BD Emerson — Quality of Earnings Report Cost: Fee Ranges (2026)
• Bedrock — How Much Does a Quality of Earnings Report Cost in 2026

Read next

• What documents to ask a seller for — and what each one has to prove
• Quality of Earnings (QoE)
• Pre-screen, Quality of Earnings, or full due diligence — which does your deal need?
• Add-backs
• Debt Service Coverage Ratio (DSCR)

Have the documents already? A DealLoupe pre-screen reads what the seller gave you and reports the red flags, the evidence gaps and the questions to ask — before you spend anything on due diligence. See what it costs →

Last updated: 2026-10-09. Educational information, not financial or legal advice — and not a substitute for a CPA, an attorney or a formal Quality-of-Earnings review.