Account Receivable out the roof!

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July 30, 2025

by an investor from Georgia State University in Atlanta, GA, USA

How would you structure this kind of AR into the deal? Company have been doing $1.7M-$2.2M the past 3 years, 2025 BS show $1.23M AR, EBITDA $400K, 10 employees, seller is semi involved. He's asking $1.62M (bit over priced) includes $120K working capital, FFE $1.5M (fully depreciated). Seller is retiring,
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Reply by a searcher
from University of Richmond in Valparaiso, FL, USA
I might recommend including a working capital true up in your PA, backed by an escrow account that represents a percentage of the total AR. Give the seller and your team a reasonable amount of time to collect the AR and then subject to a percentage of collections seller has the ability to earn more cash for any/all AR they collect or materially contribute to you collecting.
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Reply by a lender
from University of Missouri in Denver, CO, USA
Typically I would think either retained by the seller or using a purchase price adjustment / true-up including a WC target
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