Seller doesn't want to show banks their add-backs, has anyone encountered?

searcher profile

May 03, 2021

by a searcher in Cleveland, OH, USA

Have a business under LOI. It makes 550k/year after add-backs each of the last 3 years, but the 2020 tax return shows only 100k EBITDA and###-###-#### show 300k. The add-backs to get to 550k are largely personal expenses and payments to family members, and the seller is extremely uncomfortable with that information being shown to anyone outside of me.

Without at least ~half of these add-backs, the business won't be able to clear DSCR thresholds that are needed for SBA loans. There is a broker involved, but he is not explaining the situation to the sellers.

Has anyone encountered this before? How can I help assuage fears, build trust, and give comfort on a new and vulnerable process for the seller?

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commentor profile
Reply by a lender
in Yorba Linda, CA, USA
If they don't wish to provide a lender with proof of the cash flow, then the alternative would be for that seller to carry the paper themselves.
commentor profile
Reply by a searcher
from University of California, Santa Barbara in Los Angeles, CA, USA
If there is a broker, this is where they need to earn their commission. The broker likely knows the seller has to provide this data otherwise neither of them are getting paid. Push the issue back to the broker. If no broker, tell the seller this is what I need to pay you. If you can't provide it, the bank won't give me the money to give to you. The point is to show the seller how helping the bank helps them. If that doesn't work, move on from the deal.
commentor profile
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