Guide · Updated
Your First CIM: What to Do in the First 48 Hours
You are a few months into your search. A broker finally sends a CIM, you open a 40-page PDF full of charts and a confident asking price, and the question hits you: what do I actually do with this? The mistake almost every first-time searcher makes is to start typing the CIM into a spreadsheet line by line. That is a week of work on a deal you have not yet decided is worth a week. Here is the order that protects your time.
Hour 1: Is it even the right size?
Before anything else, check that the deal fits the box an SBA 7(a) loan and your equity can carry. The 7(a) program caps a loan at $5 million, so a business priced much above that needs more equity or a different structure. In our fictional sample deal, the asking price is 6,000,000, financed with a 4,800,000 SBA loan, a 600,000 seller note and 600,000 of buyer equity. If the price, the likely loan and the cash you can actually put in do not line up in sixty seconds, stop here.
Hours 2 to 3: Can a lender fund it?
The single ratio that decides whether a bank can lend is the debt service coverage ratio: the cash the business throws off divided by the loan payments. SBA lenders generally want at least 1.25x. You do not need a full model to estimate it, you need the earnings figure and the loan terms. Run the asking price through the SBA DSCR calculator and you will know within minutes whether the deal clears with room to spare or dies on arrival. Deals that barely clear at the asking price rarely survive a single bad month.
Hours 4 to 6: How inflated are the earnings?
The CIM's earnings number is almost always higher than what a lender will underwrite, because the seller has added back expenses the business will still have. You do not have to reconcile everything yet. Pull the first page of the seller's most recent Form 1120-S and spot-check three lines: revenue, officer compensation and net income. If the CIM's adjusted EBITDA is wildly above the tax return's, the real price-to-earnings multiple is higher than advertised. In the sample deal the broker's adjusted EBITDA is 1,690,000; rebuilt from the return it is 1,425,330, a gap worth roughly 1,114,142 of purchase price. When a deal survives this spot-check, the full CIM-to-tax-return reconciliation is your next step.
Hours 7 and on: Read the story last
Only once the numbers survive do you spend time on the narrative: how concentrated the customers are, how much the business depends on the owner personally, whether the growth story is real or a chart. A beautiful story on a deal that cannot be financed is still a no. A plain business that clears DSCR with cushion and has honest earnings is a yes worth pursuing.
What the first 48 hours are really for
The goal is not a model. It is a confident go or no-go, so your real modeling hours go only to deals that can close. When a CIM clears the screen, that is when the detailed work earns its keep, and when handing the packet to us turns a weekend of typing into a two-hour turnaround.
Frequently asked questions
What is a CIM?
A CIM, or confidential information memorandum, is the marketing document a business broker sends to prospective buyers. It describes the company, its financials and the asking price. It is written to sell the business, so treat its numbers as claims to verify, not facts.
Do I need to sign an NDA to get a CIM?
Almost always. Brokers release the CIM only after you sign a non-disclosure agreement and often a basic buyer profile. Signing an NDA does not commit you to anything else.
How long should it take to screen a CIM?
An initial screen should take an evening, not a week. The goal in the first 48 hours is a go or no-go decision, not a full model. You build the detailed model only on deals that survive the screen.
What is a fair asking-price multiple for a small business?
Most SBA-financeable lower-middle-market deals trade somewhere around 3 to 5 times adjusted EBITDA, depending on size, industry and customer concentration. The multiple only means something once you have rebuilt EBITDA yourself, because the seller's EBITDA is usually inflated.
Should I pay for a quality of earnings report on the first look?
No. A quality of earnings report costs thousands and comes after the LOI. In the first 48 hours you are deciding whether the deal is even worth an LOI.