Why We Reject 90% of the Deals We See

Every deal that lands on my desk has already been approved by someone else. A funder looked at it, ran their numbers, and said yes. By the time it gets to me, it has already passed one round of underwriting.

I still say no to 9 out of 10.

Why the funder's yes is not enough

A funder is in the business of funding. They need to deploy capital. Their underwriting is built for volume. That does not mean it is bad. It means their threshold and my threshold are not the same.

I am not a funder. I am a buyer. I am putting my own money into a position alongside the funder. If the deal goes sideways, I lose. So I start from scratch every time, regardless of who approved it first.

What I actually look at

The first thing I check is the average daily balance in the business bank account. Not the deposits. Not the revenue. The balance. That number tells me whether the business actually keeps cash or just moves it through.

A business can show $30,000 a month in deposits and still have $400 sitting in the account at the end of every day. That tells me the money comes in and goes right back out. There is no cushion. If anything goes wrong, the daily payments I am counting on are at risk.

I also look at how much the business already owes. If there are three or four existing positions already pulling from the account, I need to know whether there is room for one more. Not based on what the funder thinks. Based on what the bank statements actually show.

Why 90% do not make it

Most of the deals I reject look fine on paper. The business has been open for years. The revenue is real. The funder approved it. But when I dig into the bank statements, the story changes.

The balance is too low. The deposits are inconsistent. There are negative days. The business is already stretched thin on existing obligations. Or the price on the deal does not match the risk.

Any one of those is enough for me to pass.

Why I am fine with that

I would rather say no 9 times and be right on the 10th than say yes 10 times and be wrong on 3 of them. The math on this business only works if you are disciplined about what you buy. One bad deal can wipe out the profit from five good ones.

Volume is easy. Discipline is not. I choose discipline every time.