Anchored to the cancellation rate
Why deals die
A bank credit committee has already said yes, the buyer has already spent money on diligence, and the deal still does not close. It happens to close to one approved acquisition loan in eleven, and the reasons repeat.
Last reviewed 4 September 2026
Anchored to
8.9% of approved acquisition loans are cancelled before any money moves
How often it happens
Between FY2019 and 2026-06-30, lenders approved 46,696 SBA 7(a) loans to finance the purchase of an existing business. 3,965 of them were cancelled before a dollar was disbursed. That is 8.9% of everything that reached a credit decision, and it is the single most under-discussed number in small company M&A.
The figure matters because of where it sits in the process. A cancellation at this stage is not a deal that failed to find a buyer. It is a deal that found a buyer, agreed a price, signed a letter of intent, went through underwriting, and got a yes from a bank. Everything expensive had already happened. What follows is what usually goes wrong after that point, in roughly the order it tends to surface.
The books do not survive diligence
The most common failure is not fraud. It is that the earnings the seller believes in cannot be shown to a third party. Owner-managed accounts are kept to minimise tax, and the adjustments that turn a tax return into a picture of real profitability are held in the owner's head rather than in a schedule.
When a buyer's accountant asks for the support behind an add-back and it does not exist, the add-back comes out. A handful of removals can move the price materially, and a price move at that stage does not feel to the seller like an adjustment, it feels like a renegotiation. Deals die from the offence more often than from the arithmetic. The way to avoid it is to do the work first, which is what a quality of earnings exercise is for.
Concentration comes to light
A business where one customer is a large share of revenue is a different asset from one where the largest is small, and a lender underwriting a ten-year note is acutely aware of it. So is a buyer who has to service that note personally.
Concentration rarely kills a deal on its own. It kills deals when it is discovered rather than disclosed. A buyer who learns in week two that the top customer is a third of revenue prices it. A buyer who learns it in week nine, after being told the base was diversified, stops trusting everything else in the room.
The lease and the landlord
For any business tied to a location, the lease is part of the asset. A buyer financing over ten years needs occupancy for something like that horizon, and a lender will generally want the lease term to reach past the loan. If the remaining term is short, if assignment needs consent the landlord will not give, or if the landlord decides the sale is the moment to reset the rent, the deal can stall entirely.
This is the failure most easily prevented and most often ignored, because it involves a third party with no stake in the transaction closing. Where the seller also owns the building, the picture changes completely, and the real estate becomes part of the financing.
The business turns out to be the owner
Every buyer asks what happens when the seller leaves. The answer is often more uncomfortable than the seller expects. If the relationships, the pricing judgement, the technical knowledge and the goodwill all sit with one person, then what is being sold is a job with equipment attached.
This is where transitions, consulting arrangements and earnouts get proposed, usually late, usually as a rescue. They work better when they were part of the plan from the beginning.
The working capital argument
A surprising number of deals that survive everything else fall over on a mechanism most sellers have never heard of until it appears in a draft agreement. The working capital peg decides how much cash, receivables and inventory has to be left in the business at closing, and disagreements about it arrive late, when both sides are tired. The mechanism is worth understanding before you meet it.
Fatigue
The least dramatic cause and one of the most common. A sale process runs for months while the seller is still running the business. If trading softens during that period, and it often does because attention has moved, the buyer is entitled to ask why, and the answer is not flattering. Deals that take too long tend to die of the delay itself.
What actually prevents it
Almost every cause above is a surprise rather than a problem. The problems are mostly survivable; the surprises are what break trust, and trust is what carries a transaction through the last four weeks.
Preparation is unglamorous and it is the whole job: clean, supportable adjusted earnings before anyone asks; concentration disclosed early and explained; the lease dealt with before it is a discovery; and a realistic view of what the business looks like without its owner. None of that guarantees a closing. It removes the specific reasons that 8.9% of financed acquisitions do not reach one.
Not advice. This page is general information about how transactions in this market are commonly structured. It is not legal, tax, accounting or investment advice, it does not predict what any business will sell for, and it does not recommend any structure for any particular situation. No client of FIH is described or alluded to anywhere on this site.
More: How the note sets the price, Quality of earnings, The working capital peg, Earnouts, Seller notes and standby paper, Reps, warranties, escrow and insurance. See also Methodology and sources.
This is what FIH does for a living
FIH advises owners of privately held companies through sale processes: preparing the business, running a competitive approach, and negotiating the terms described above. An initial conversation is confidential, costs nothing and commits you to nothing.