What Goes in a CIM (Confidential Information Memorandum) for a Main-Street Business
No federal rule we read prescribes a CIM, but under SOP 50 10 8.1 an SBA 7(a) buyer's lender must verify the seller's figures against IRS transcripts and, outside an ESOP loan, may not use a business valuation prepared for the seller. In an Initial Acquisition or Business Expansion at a Business Purchase Price of $3,000,000 or more, other than an owner-occupied Special Purpose Property acquisition, the lender must also obtain a Quality of Earnings report and use its earnings for coverage. Total debt is capped at the lender's business valuation, and price above it is met by equity. So the CIM's financials tie to the tax returns and it carries no valuation. The structure below is ours.
This is general information, not legal, tax or lending advice. We are not attorneys, CPAs or lenders, and not a licensed business broker in any state. Confirm your sale with your attorney, your CPA and the buyer's lender.
What is a confidential information memorandum, and who reads it?
A confidential information memorandum, or CIM, is the document a seller gives a prospective buyer after a confidentiality agreement is signed, in enough detail to decide whether to make an offer.
No federal rule we read says what it must contain: the words confidential information memorandum, teaser and data room appear in neither SOP 50 10 8.1, the SBA's lending manual effective 1 October 2026, nor 13 CFR 120.202, the 7(a) change of ownership regulation. But if the buyer uses an SBA 7(a) loan, the CIM has a second reader. Section A, Chapter 5 of the SOP:
For a change of ownership, the SBA Lender must verify the seller’s financial data, including a selling sole proprietor’s Schedule C.
What goes in a CIM for a main-street business?
Fifteen sections in our structure, up to twenty where a section splits for a business with several locations.
| Section (our structure) | What it is for |
|---|---|
| 1. Executive summary | The business, its industry, location, age, earnings and what is for sale. |
| 2. Highlights | The strongest facts, each checkable in the data room. |
| 3. History and ownership | Founding, legal entity, the owner's role today. |
| 4. Products or services | What is sold, to whom, at what prices. |
| 5. Customers and concentration | Largest customers as percentages of revenue, no names. |
| 6. Operations and suppliers | How the work gets done; key suppliers by category. |
| 7. Staff and the handover | Roles and tenure, no names; the seller's transition, within the SOP's consulting limit (below). |
| 8. Facilities and lease terms | Each location, lease expiry, options, assignment terms. |
| 9. Financial summary | Three fiscal years and interims, at the highest level of reporting available. |
| 10. Normalized earnings schedule | Tax return net income to seller's discretionary earnings and EBITDA, each adjustment documented. |
| 11. Growth opportunities | Options for a new owner, not projections. |
| 12. Risks | Concentration, key person, lease and supplier risks, with mitigants. |
| 13. Asset list | Every asset conveyed, by Form 8594 class. |
| 14. Transaction summary | Asset or stock sale as your attorney structured it, exclusions, any seller note, any asking price. |
| 15. Next steps | What the data room holds and how to request access. |
Why do the CIM's numbers have to tie to the tax returns?
Because the buyer's lender must verify the seller's financial data, the figures the CIM presents, against IRS transcripts. Appendix 15 requires the lender to obtain the valuation analyst's financial inputs and "verify that information against the seller’s IRS transcripts", and to analyze the three most recent fiscal years "using the highest level of financial reporting available", a ranking that ends at "(4) Corporate Tax Returns". Our schedule starts from the return, the document the transcripts verify, and bridges any audited, reviewed or compiled statements to it. Illustration, figures assumed, for a business that pays no entity-level income tax:
| Line | Amount | Traceable to |
|---|---|---|
| Net income per tax return | $182,000 | Return, net income line |
| Add: officer compensation | $118,000 | Return, officer compensation line |
| Add: depreciation | $24,000 | Return, depreciation line |
| Add: interest expense | $9,000 | Return, interest line |
| Add: one-time legal expense | $12,000 | Dated invoice in the data room |
| Seller's discretionary earnings | $345,000 | 182,000 + 118,000 + 24,000 + 9,000 + 12,000 |
| EBITDA, the SOP's historical DSC basis, before any lender adjustment | $215,000 | 182,000 + 24,000 + 9,000; any further add-back is the lender's to justify |
What a gap costs. If the CIM states earnings of $400,000 and the schedule that ties to the returns supports $345,000, the $55,000 difference is earnings the transcripts do not show. Total change of ownership debt is limited to "the business valuation amount", and "If the amount paid for the business exceeds the business valuation, the difference must be made up by equity." Our reading: price resting on unverified earnings has to be met with equity, which a seller note supplies only if subordinated and on full standby (see SBA equity injection requirements). Coverage is on SBA debt service coverage requirements; pricing arithmetic, on how to price a business so an SBA buyer can finance it.
What does the lender's Quality of Earnings report do to a CIM at $3 million?
Where a QoE is required, the lender "must use the earnings from the QoE in the Debt Service Coverage (DSC) determination", not the seller's figures, and if that coverage falls short, "the loan amount must be reduced accordingly". Appendix 15:
For Business Expansion and Initial Acquisition transactions where the Purchase Price as defined in Paragraph A.1 is equal to or greater than $3 million, the Lender must also obtain a Quality of Earnings (QoE) in addition to the required Business Valuation.
The threshold "is determined before the application of buyer equity, seller debt, or other financing sources" and uses the Business Purchase Price, the contract price less owner-occupied real estate at appraised value. Illustration, figures assumed: a $3,400,000 contract including real estate appraised at $600,000 is a $2,800,000 Business Purchase Price, below the line, though the valuation and transcript rules still apply; $3,200,000 with no real estate is above it.
ESOP and cooperative purchases, owner-occupied Special Purpose Property acquisitions at any price, and Owner Buyouts that meet the 24-month employment tests are outside it; an Owner Buyout that fails them takes the Initial Acquisition "minimum DSC, minimum equity injection and Quality of Earnings requirements".
The report "must reconcile the business's accountant-prepared financial statements, tax returns, internal financial statements, and IRS transcript data", includes a bank statement Cash Proof, and "must not be prepared by or for the seller". Who may perform the lender's valuation is on SBA business valuation requirements; the employment tests are on SBA loan to buy a business.
What should a CIM leave out?
In our structure, five things.
Customer names. We show the largest customers as percentages of revenue, no names, by our choice, not an SBA rule. Where the buyer's lender must obtain a QoE (see above), the report must assess "customer concentration risk", so the percentages stay in.
Figures that cannot be reconciled. For the coverage test, cash flow adjustments without the lender's supporting analysis and justification are "ineligible for purposes of determining this core underwriting requirement". An add-back with no document behind it stays out.
A valuation. Outside ESOP loans, Appendix 15 says "the business valuation must be requested by and prepared for the Lender" and "The Lender may not use a business valuation prepared for the Applicant or the seller." A valuation inside a CIM is one the buyer's lender may not use. Whether to state an asking price is your decision; we do not advise on it.
Projections. The lender may not rely on post-closing projections to meet coverage (except in buying an owner-occupied Special Purpose Property whose appraised value fully collateralizes the loan, where the ratio must be met within two years of funding), so our financial sections are history only.
An earnout. For a 7(a) change of ownership, "Seller earnouts are prohibited".
What is a blind teaser, and what makes it blind?
A blind teaser is a one to two page summary that identifies nothing about the business, sent before a confidentiality agreement so a buyer can decide whether to sign one. Our test: a competitor in the same trade and town could not name the business from it. Ours gives the general industry, state or metro area, years in operation, revenue and normalized earnings as ranges, whether real estate is included, the reason for selling and the structure sought, and omits the name, address, website, photographs, customer and supplier names, license numbers and any valuation or multiple.
What goes in the data room index?
The documents an SBA 7(a) buyer's lender must obtain or verify, released as you decide. The full list is on documents needed to sell a business without a broker.
| Index item | SOP 50 10 8.1 | Where |
|---|---|---|
| Seller's statements, last three fiscal years, and interims | Dated and "signed or certified by the seller within 120 days prior to submission to SBA"; interims "no older than 120 days from date of submission to SBA" | Appendix 20 |
| Business tax returns, same years | Verified against the seller's IRS transcripts | Section A, Chapter 5; Appendix 15 |
| Bank statements, trailing 12 months and last two fiscal years | Cash Proof data where a QoE is required | Appendix 15, Quality of Earnings |
| Purchase agreement with all schedules and amendments | Part of the lender's loan documentation | Appendix 15, Section A |
| Lease | "Copy of Lease, if applicable" | Appendix 20 |
| Seller note and standby agreement | Equity only if subordinated to the lender and on full standby for the 7(a) loan's term (SBA Form 155 or equivalent) | Appendix 15, Source of Equity Injections |
| Transitional consulting agreement | Where the seller may not remain (Initial Acquisition, Business Expansion), "for a period not to exceed 24 months (in aggregate, including any extensions)" | Appendix 15, Section A |
| Asset list, transferable licenses included | A "detailed listing of all assets purchased with loan proceeds"; conveyed assets and licenses secured as collateral; Form 8594 class grouping for 26 U.S.C. 1060 | Appendix 20; Appendix 15, Section A; 26 U.S.C. 1060 |
The asset list and Form 8594. In an asset sale of a trade or business (an applicable asset acquisition), 26 U.S.C. 1060 makes a written price allocation "binding on both the transferee and transferor" unless the IRS finds it inappropriate, and under the IRS instructions (Rev. November 2021), "Both the seller and purchaser of a group of assets that makes up a trade or business must use Form 8594 to report such a sale if goodwill or going concern value attaches, or could attach, to such assets and if the purchaser's basis in the assets is determined only by the amount paid for the assets." Our asset list follows the form's classes; your CPA prepares the form.
Who sends the CIM?
You do. We write the documents on your instructions from information you supply; you decide who receives each one, and we never send any of them.
15 U.S.C. 78o(b)(13) provides that an M&A broker, one effecting securities transactions solely to transfer ownership of an eligible privately held company, "shall be exempt from registration under this section", that is, registration with the SEC as a broker or dealer. The exemption excludes one that "receives, holds, transmits, or has custody of the funds or securities to be exchanged by the parties to the transaction". On our reading, a firm that writes documents for a fixed fee and does not solicit, negotiate, hold funds or bind anyone is not doing what the section describes; whether a particular person needs a license is for that person's attorney. The section's other pages are at exit and acquisition documents.
Can Business Plan Firm write your CIM?
Yes: ours is $2,800, fixed, delivered in 10 business days.
Our Pricing Analysis is $1,250, a confidential information memorandum with blind teaser and data room index $2,800, and an acquisition business plan $1,800, or $2,800 with the acquisition model, all fixed. We never charge a percentage of anything you borrow, invest, raise or sell, and no part of our fee depends on a transaction completing. Every price we charge is on one page: /pricing.
Business Plan Firm is the US practice of Avvale, a London consultancy. We have written 1,000+ plans for 500+ founders across 30+ countries, and our clients have raised $500M+.
How we verified this
Quotations were checked against raw text retrieved on 30 October 2026.
- SBA SOP 50 10 8.1, effective 1 October 2026, from SBA's SOP 50 10 page: Section A, Chapter 5, Paragraph B; Appendix 3 (Definitions: Business Purchase Price, Quality of Earnings); Appendix 15 (Section A, Owner Buyout, Business Valuation Requirements, Quality of Earnings, Source of Equity Injections, Lender's Credit Analysis); Appendix 20. The full text contains no confidential information memorandum, teaser or data room.
- 13 CFR 120.202 at the Legal Information Institute: it permits 7(a) proceeds to fund a change of ownership and names no documents.
- 26 U.S.C. 1060 (statute) and the IRS Form 8594 instructions (Rev. November 2021), listed as the current revision on the IRS About Form 8594 page, which the IRS last reviewed on 30 March 2026.
- 15 U.S.C. 78o(b)(13) (statute), the M&A broker exemption, its exclusions and its effective date note (90 days after enactment).
- Federal Register, searched 30 October 2026: nothing from SBA since 1 June 2026 on SOP 50 10, or since 1 September 2026 on changes of ownership, valuations or Quality of Earnings.
Not verified, so not on this page: CIM length norms, valuation multiples, fees for a lender's valuation or QoE, state business broker licensing rules, and whether a fixed-fee document writer is an M&A broker in law.
Frequently asked questions
What is in a confidential information memorandum for a small business?
No federal rule we read prescribes what a confidential information memorandum contains. In our structure, a main-street CIM has fifteen sections, including customer concentration, the handover, a normalized earnings schedule that ties to the tax returns, the asset list and the transaction summary.
Does the SBA require a CIM to buy a business?
No. SOP 50 10 8.1 and 13 CFR 120.202 do not mention one. For a 7(a) change of ownership, the SOP requires the lender to verify the seller's financial data against IRS transcripts and, outside ESOP loans, obtain a business valuation prepared for the lender.
Should a CIM include a valuation or an asking price?
Not a valuation, in our structure. Under Appendix 15 of SOP 50 10 8.1, outside ESOP loans, the buyer's SBA lender may not use a valuation prepared for the seller, so a valuation inside a CIM is one that lender may not use. An asking price is the owner's decision.
Does a CIM have to match the seller's tax returns?
If the buyer uses an SBA 7(a) loan, SOP 50 10 8.1 requires the lender to verify the seller's financial data and the valuation's inputs against IRS transcripts. So our normalized earnings schedule starts from the tax return, the document the transcripts verify.
What is a blind teaser for a business for sale?
A blind teaser is a one to two page summary sent before a confidentiality agreement. It identifies nothing about the business and states revenue and earnings as ranges. Our test: a competitor in the same trade and town could not name the business from it.
This page summarizes the primary sources listed under How we verified this, as retrieved on 30 October 2026. It is general information, not legal, tax, lending or investment advice; the document structure is ours, not a legal or lender requirement.