How Not to Close in 2026.

Hi Reader

Here's what my calendar has looked like for two weeks.

LOI. LOI. LOI.

Sellers want out before the year ends. So they're bending.

One seller this month went soft on price. Then they dropped all the talk about getting paid extra for "upside." A year ago, that fight would have dragged on for weeks and ended in a higher price or a standoff. This time it fit inside SBA's rules in one conversation.

It's not just one deal. Seller after seller is agreeing to build downside protection right into the seller note. If the business stumbles after closing, the note takes the hit. Not you.

Things they wouldn't have said yes to in June, they're saying yes to now.

If you just signed one of those LOIs, congratulations. You probably got a good deal.

Now the bad news.

You're also on the most crowded road in my world right now. Everyone wants December. Nobody does the math. The deal slips into February, and the seller who was so generous in October isn't feeling generous anymore.

That's how not to close in 2026. Here's what to do instead.

FIRST, THE MATH

In August I told you to be under LOI by Labor Day. An SBA deal takes 90 to 100 days from LOI to closing when things go well.

Sign in the first two weeks of October and that math lands you somewhere between December 30 and January 22. And that's before Thanksgiving eats two weeks and the holidays eat most of December.

December is possible. It isn't the default. You have to go take it.

You're also doing this under the new SBA rules. You know that. Everyone at your table knows that. What most buyers don't know is which pieces of those rules move your closing date. And three of them changed again after I wrote about them in August. I'll flag those as we go. Want everything SBA changed in that late-September update, not just the three? I put it all in a short PDF.

​Get the update here. ​

Here's the list.

1. Pick your month. This week.

December or January. Choose one on purpose.

The worst plan is "December, if we can." It sounds flexible. It's a coin flip with the seller's patience riding on it. Your lender plans to one date, your attorney to another, the seller to a third. Nobody owns the gap.

So decide. If it's December, everyone works a December calendar starting Monday. If it's January, say so now, to everyone. Including the seller.

A January 15 closing you planned beats a December 30 closing you begged for.

2. Pick a lender who closes. Then ask for their cutoff.

In a normal year, a so-so lender costs you a few weeks. This year, it costs you the year.

So look hard at who's carrying your loan. Not the rate. The record.

Two kinds of lenders kill year-end deals. The one with the cheapest rate and a reputation for closings that slide and terms that wobble in underwriting. And the tiny, hungry newcomer who promises everything and closed two deals last year.

You want the opposite. A lender, or a loan broker, who's organized and knows what they're doing. Ask how many deals like yours their team closed in the last twelve months. Then call someone who's closed with them and ask what happened between the term sheet and the wire.

A quarter point off the rate doesn't help if you close in March.

Once you've got the right lender, ask them one question: "What's your real cutoff?"

Your lender has a last day. It's the last day a complete file can hit credit and still fund before New Year's. They know the date. Most won't tell you unless you ask.

So ask. Then ask the follow-up: "What does complete mean to you?" Get the list in writing.

That date is your deadline. Not December 31. Work backward from it.

3. Run the lender's math before you pay for anything.

Under the new rules, your lender can't count projections on a regular acquisition. No "next year will be better." Your loan lives or dies on what the business already earned.

So before you spend a dollar on diligence, have your lender run the coverage test on the real numbers. Ask two questions.

What number are you testing against? Most acquisition lenders want 1.25.

Which years are you testing? This is the one. The rule lets the lender use the last full year or a two-year average. Plenty of lenders are applying it to every year, bad year included. That's stricter than the rule. If the answer is "all of them," ask where it says that.

Coming up short? You have three fixes. Lower the price. Put the seller note on full standby. Or bring more of your own cash and shrink the loan. SBA now says that last one out loud.

Find the gap in October and it's a conversation. Find it in November and it's a retrade. Find it in December and it's a dead deal.

4. Book the QoE this week. And check the one you already bought.

If your deal is $3 million or more, the new rules require a quality of earnings report. The good firms are already booking into November. Sign the engagement letter this week.

Now the update. In August I told you a QoE you paid for yourself wouldn't count. Your lender had to hire its own.

That changed in late September. If you commissioned a QoE, your lender can have a firm it approves review yours, and then use it. Only a QoE the seller paid for is off the table.

Already spent $15,000 to $30,000 on one? Call your lender today. Which review firms do you take? What does the review cost? How long does it take?

That call can save you weeks. Weeks are what you don't have.

5. Small deal? Your road just got shorter.

Another one from August that changed. I told you the small-loan programs were closed to acquisitions. They're open again. 7(a) Small and SBA Express can both fund a business purchase.

Don't read that as a shortcut. The full acquisition rules on coverage and down payment still apply. But one real speed bump comes out. If the price is $350,000 or less, your lender can value the business in-house instead of waiting on an outside appraiser. The exception is when you and the seller are close.

On a small deal racing the calendar, skipping the appraisal line can be the whole difference.

Ask your lender if your deal qualifies. Don't wait for them to bring it up.

6. Recount your 10%. Against everything.

Your down payment isn't measured against the price anymore. It's measured against the total project cost. That's everything it takes to open the doors on day one, lines of credit aside.

Working capital in the deal? Closing costs? Your 10% just got bigger.

Have your lender re-run your number this week. Then park the cash in the account it will wire from, and stop moving it. Every transfer is a new statement somebody has to source.

Part of it a gift from family? Good news. SBA now names gifts as a source of down payment. Get the gift letter signed now. Not in December.

7. Find out who funded the trust.

The third August update. I told you any trust owning any piece of the borrower had to guarantee the loan. SBA backed off. The guaranty now kicks in when trusts together own 20% or more.

But there's a new catch. Anyone who put money into the trust is treated like the person who set it up. And that person guarantees too.

Think about who funds trusts. Parents. Grandparents. Say Mom and Dad seeded your trust years ago, and your trust takes 30% of the company. They may be signing for your loan.

That's not a call you want to make the week of closing. Find out now who funded every trust on your ownership chart.

8. Lock the fuzzy terms while the seller still wants December.

Here's the part nobody's thinking about.

Your seller got flexible because of a date. Their date. That flexibility has an expiration date on it.

Every term your LOI left open is a term you'll negotiate later. With a seller who may be less generous later. Working capital target. Seller note terms, standby included. What the seller does after closing, and for how long.

That last one got better under the new rules. A seller can now stay on as a consultant for up to 24 months. In a licensed trade, like HVAC, electrical, or plumbing, that's real runway. Two years for your best employee to get licensed, or for you to rack up the hours, while the seller's license keeps the doors open. Check your state board first. Some want the license holder to be an owner or employee, not a consultant.

Same goes for the downside protection. If your seller agreed the note will absorb a bad year, get the exact terms down now. What triggers it? How much comes off? Measured how? "We'll take care of you if it dips" is a handshake. You need a formula.

Settle all of it now. A one-page term addendum, or get it into the first draft of the purchase agreement within two weeks.

The two late fights I'm seeing most right now? Stock or asset. And the working capital peg.

Stock or asset sounds like paperwork. It isn't. It changes the seller's tax bill and which old problems come with the business. If your LOI just says you're buying "the business," you haven't agreed on what you're buying yet.

The peg is the normal amount of working capital that has to be in the business on closing day. Leave it "to be agreed" and you'll agree on it in December. With a QoE on the table, the clock running, and nobody feeling generous.

9. Ask the seller if December really matters.

This one surprises people.

You're racing to close in December for the seller. Did you ever ask why December?

Sometimes there's a real reason. A move. A health scare. A promise to a spouse. Sometimes it's just a round number that felt good in September.

Ask. "If we closed the first week of January instead, would that change anything for you?"

You might find out the deadline you're killing yourself for doesn't belong to anybody.

Either way, you just showed the seller you're thinking about their side. Sellers remember that.

10. Write the January plan while everyone's happy.

Pull out your LOI. Find the exclusivity period. Signed in October, there's a good chance yours runs out right about when a January closing would land.

Ask for the extension now. In October, it's a friendly email. On December 28, it's a negotiation with a seller who just watched their date slip.

Then think about how the seller will feel if it slips.

They told the family it'd be done by Christmas. They told the employees. Maybe they told the guys at the coffee shop. Now it's January. The wire hasn't come. The reason they said yes is gone.

That's when sellers start doing math. Is this still the right buyer? Is this still the right price?

You can't stop that feeling. You can get in front of it. Show the seller today what a January closing looks like. Make a slip a schedule change, not a broken promise.

THE DATE WAS NEVER YOURS

Here's what I want you to take from all ten.

The seller didn't just say yes to you. They said yes to a date.

Your job between now and New Year's isn't to hit December 31 at any cost. It's to make sure that when the date moves, and dates move, the seller's yes doesn't move with it.

Have the hard talks in October. Then whatever month you close in, you close.

Just signed an LOI? Hit reply and tell me where you're stuck. The lender, the seller, the calendar. Whatever it is.

Stay safe.

Eric Hsu

→ @lawyer4smbs

P.S. Know someone who signed an LOI this month? Forward this. Especially if they think they're closing December 31.

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