Diligencing a Predominantly Cash Business

searcher profile

April 04, 2023

by a searcher in New York, NY, USA

Hi, I would love to speak with anyone who is willing to share their experience around a business that had the following characteristics that involved going through SBA

- at least half or more of the sales in form of cash
- differences in reported tax returns and the adjusted P&L

recognize this is a little sensitive area that plenty others have struggled with so would love to hear more about the things that people did to get comfortable with the risk (both from the perspective of the sales actually being there as reported by owner and having to take the business through SBA)

0
3
75
Replies
3
commentor profile
Reply by a professional
from University of Wisconsin in Austin, TX, USA
I run a DD company and we've encountered this a number of times. Happy to have a chat or connect you with my lead analyst (she's the real expert here).

Few thoughts..

Cash is tricky, you can check cash deposits in bank statements but not sure it would be accurate. I would trust on Sales Tax and/or VAT tax returns on those cases

Re differences - they can be justified. Often its due to the type of accounting they use and can be reconciled. Clarity on this would come out in FDD
commentor profile
Reply by a lender
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
I would be more than happy to jump on a call to discuss. If they are reporting the cash collections then it should not be an issue to get done with SBA. However, if there is a lot of cash not getting reported and you need that cash to make the deal work, it will be very challenging if not impossible to get an SBA loan done. Again, I would be more than happy to discuss this particular situation with you. You can ping me here or reach me directly at redacted
commentor profile
+1 more reply.
Join the discussion