Most search fund operators review 50-100 deals before finding one worth pursuing. This checklist helps you screen deals in under 60 minutes and make a PROCEED/PARK/PASS decision.
1. Deal Size & Economics
EBITDA in $2-10M range (search fund sweet spot)
Asking price multiple: 3-5x normalized EBITDA
Purchase price: $5-30M (typical search fund range)
Normalized EBITDA >$200K (supports SBA debt service)
2. Quality of Earnings (QoE)
Green Flags:
- Customer concentration <20% from top customer
- Stable or growing revenue (3-5 year trend)
- EBITDA margin >15%
- Conservative addbacks (owner salary at market rate)
Red Flags:
- Customer concentration >50% (SBA ineligible)
- Revenue declining >20% per year
- Aggressive addbacks (>$300K owner salary)
- One-time revenue items (asset sales, settlements)
- Negative or deteriorating working capital
3. SBA 7(a) Eligibility (2026 Rules)
Deal size <$5M loan required
DSCR >1.25x (normalized EBITDA / debt service)
Customer concentration <50% from single customer
Passive income <50% of revenue
US ownership (100% US citizens/permanent residents)
Equity >15% (lenders prefer for deals >$1M)
4. Business Model Fit
Recurring revenue (maintenance contracts, subscriptions, retainers)
Low owner dependency (can run without owner)
Scalable (can add locations, customers, services)
Sticky customers (high switching costs, long contracts)
Market leader or niche player (not commodity)
5. Owner & Transition Risk
Owner willing to stay 6-12 months for transition
Clear succession motivation (retirement, health, other interests)
Management depth (can business run without owner?)
Documented processes and systems
Decision Framework
✅ PROCEED
Submit IOI if deal passes QoE, SBA eligibility, business model fit, and owner transition looks manageable.
⏸️ PARK
Interesting but need more info: financials, customer list, management depth, or owner commitment.
❌ PASS
Too many red flags, wrong size, SBA ineligible, or not search fund-friendly. Move on quickly.
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SearchFindr analyzes CIMs in 60 seconds using this exact checklist. Get instant PROCEED/PARK/PASS recommendations with QoE red flags, SBA eligibility, and search fund fit analysis.
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