Probity deal diligence: what it is and how it works

Probity deal diligence is the check a small business buyer runs on the seller's profit number before agreeing a price. You upload the seller's last three business tax returns. Probity rebuilds each year line by line and shows where the broker's earnings figure and the returns disagree.

The letter of intent, or LOI, is the written offer that sets the price before the final contract. Seller's discretionary earnings, or SDE, is what the business earns for one owner-operator before that owner's pay. An add-back is a cost the broker adds back to profit on the theory that a new owner would not pay it.

Probity is the software that does the check. The free account runs it on one business of your own, no card, and the recast is ready in minutes.

The Harrow Creek example

Every account has a fictional sample deal, Harrow Creek Mechanical, an HVAC and plumbing contractor. For 2024 the broker showed SDE of $420,000. The returns support $298,780. The $121,220 gap is four add-backs that come off, with the reason beside each.

The broker's number comes down to what the returns support, one line at a time. The sample page shows the full Buyer SDE Summary for Harrow Creek, so you can see what the output looks like before you upload anything.

What deal diligence means here

The buyer's job is to confirm the earnings the price is built on. The broker is paid when the deal closes, and the lender's check comes after the LOI, so the first check on the numbers is the buyer's.

The tax return is the one set of numbers the seller signed under penalty of perjury, so the check starts there, before the LOI, when the price can still move. Deal diligence before the LOI works from the tax returns. Bank statements come after the LOI.

No lender in the deal? Then nobody checks the seller's numbers unless you do. The same recast runs on a cash-and-seller-note deal, and on a seller who files a Schedule C.

The full walk-through is in deal diligence when buying a small business.

What Probity checks

The core is the SDE Recast, Probity's rebuild of the seller's earnings from the returns. Probity rebuilds three years of the seller's business returns (Form 1120-S, 1120, 1065 or Schedule C, whichever the business files) line by line, with every number linked to the page it came from. One-time items are pulled out and listed. The result is a Buyer SDE, the bridge from that number to the broker's number line by line, and findings written out: what moved and what to ask about. It is the first pass an analyst would otherwise build by hand, before anyone pays for a quality of earnings report.

Around the recast: an NDA check before you sign, the 92-item diligence checklist on every deal, a buy box (your criteria for size, price, industry and location), a pipeline with a listing clipper, a document link for the seller or broker, a deal journal, and the SBA deal calculator.

The free account runs the recast on one business of your own. Running it on more deals requires Deal Check, $19.99 a month for two new deals each month. Deal Desk, $49.99 a month, covers twenty new deals each month and adds Excel and PDF downloads and one partner seat. A firm with three or more people adds Firm: Deal Desk plus $40 a seat each month from the third seat, with 35 new deals each month on three seats, and 15 more for every added seat. Plans are on the pricing page.

After the LOI: Cash Proof

Once you have the seller's bank statements, Cash Proof ties them to the tax returns month by month: deposits, withdrawals, and what does not match, with the statement page behind every figure. Already past the LOI with add-backs that are not holding? The recast still runs, and Cash Proof shows which add-backs the money does not support. Results come back within two hours of the last statement upload. Cash Proof is a one-time purchase for one deal,$995; details are on the pricing page.

Probity is not a quality of earnings report, not an audit, and not an opinion of value.

SBA buyers

SOP 50 10 8.1 took effect October 1, 2026. Every SBA change-of-ownership loan is sized by the lender's coverage test on the business's earnings. At a purchase price of $3 million or more, on a first-time purchase or one company buying another, the lender orders a Quality of Earnings report with a Cash Proof. Probity does not satisfy that requirement; it is what a buyer runs first, to decide whether a Quality of Earnings report will find anything. Confirm the threshold and scope with your lender.

Two guides cover the rules: new SBA rules for business buyers and SBA loan projections when buying a business. For the pre-LOI check itself, see deal diligence before the LOI.

Why the name Probity

Probity means honesty in financial dealings. In government procurement the word names a fairness review of a tender process; Probity deal diligence is a numbers check for one buyer on one business.

Questions