Addbacks - excessive credit card expenses

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by a searcher from Northwestern University - Kellogg School of Management
in Redwood City, CA, USA

1yr ago

Addbacks - excessive credit card expenses

Anyone experienced a situation where seller and his wife has nearly $700,000 in addbacks from credit card purchases. It is almost 60% of the annual adjusted SDE the seller is claiming. Interesting business but I have no idea how someone could accumulate that much on a credit card.

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reply by a searcher 1yr ago
from Emory University in Tucson, AZ, USA

For us, we would walk away as this type of seller behavior is a major red flag. As you dig deeper, you may uncover even more issues. Furthermore, it's unlikely to pass bank underwriting, as most banks (regardless of their risk tolerance) have strict policies against excessive addbacks beyond typical self-employed expenses like car payments and life insurance.

reply by a searcher 1yr ago
in Winston-Salem, NC, USA

Agreed - red flag. Ask for a list of expenses to see what these exactly are. If they were using business cc for personal expenses and then categorizing them as business expense to avoid taxes then certainly it would be reasonable to assume that it is technically SDE which you would have available should you own that business,.... although what they did was illegal. No way would I allow those adbacks in full value.