Addbacks - excessive credit card expenses
August 02, 2024
by a searcher from Northwestern University - Kellogg School of Management in Redwood City, CA, USA
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.
in Stuart, FL, USA
The following steps would need to be taken to prove out the items. 1- Print out a general ledger from QuickBooks for the last 3 years- go through it and number each item that you are saying are addbacks. 1, 2, 3, 4, 5 etc. 2- Print out your bank statements for the last 3 years and find all of the corresponding items and number them to match the numbers on the general ledger. Number 1 item on general ledger with number 1 item on bank statement etc. 3- Finally, find the corresponding receipt/statement showing the item and the description and match those numbers up number 1 on the ledger, number 1 on the bank statement and number 1 on the receipt or statement. Here is why we do it this way. The ledger shows you have entered it into the books of the business, the bank statement shows you ran it through the business bank account and the receipt shows what the actual items is and its corroborating amount. If you have kept good books and records, this should be fairly straightforward, if not, it may take some time. Now the bad news. The is no guarantee that even after all that work, the lender will accept it. This is where lender discretion comes in. I would be dishonest if I didn't say most lenders will not go through this brain damage. Some will if the deal makes sense.
Now, if you are just looking at a straight up purchase without institutional funding, be very careful you don't get taken to the cleaners.
in Winston-Salem, NC, USA