Lessons from three failed deals

May 04, 2026

by an investor from Golden Gate University in Vallejo, CA, USA

lessons from a few deals that died this week, sharing in case useful: "SBA pre-qualified" listings can have hidden equity injection requirements. one deal asking $1.35M was pre-qualified by the seller's lender — but only with $300K equity injection (22%), not standard 10%. That high equity requirement is a signal the lender saw risk in the underlying deal. Worth asking the broker upfront what specific equity injection the pre-qualifying lender required, before going deep on diligence. Always check revenue composition not just total. One CIM showed $400K SDE on $980K revenue, which sounds clean. Except 52% of that revenue was federal grants ending in 2025 — and the 2026 projection had subscription doubling in one year to replace it. No data supporting the doubling. Two other deals went under LOI before or during my CIM review. speed-to-LOI matters more than I expected — buyers who have lender alignment, deal templates, and diligence ready are getting these. Anyone else seeing similar patterns?

Reply by a searcher
from University of Pennsylvania in Charlotte, NC, USA

"Speed-to-LOI", always a popular topic with different viewpoints here on SF. Personally I've always failed to see how it makes sense to submit or accept an LOI without having done enough due diligence to be reasonably certain you can close on the proposed terms. Maybe it works if the deal is very simple. Or the seller is poorly advised. I realize many here see it differently. But especially at the upper end of the LMM - say $4mm+ EBITDA - most sellers and their advisors are sophisticated enough to consider a proposed LOI only if a buyer has clearly done significant homework.

Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA

Be cautious about SBA pre-qualification on listings. Although some lenders do a deep dive before providing those pre-approvals, many just review the CIM or some basic information and provide the letter and then get into the actual deal with credit later. This can lead to terms changing and the deal not holding up in underwriting. We have seen it on many occasions. We are always willing to do a complimentary review of any transactions from a lender perspective and provide detailed feedback. You can reach me here or directly at redacted

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