Hi, fellow searchers! Question on Add backs.
Submitted an LOI recently and we are now actively negotiating on the deal. I would like to get this deal done, but what's holding me back are the add backs....I can only verify what the bank has been able to verify but do trust the sellers. Despite that trust, I'm having trouble paying for add backs which I cannot verify. Not to mention the multiple on those add backs.... These add backs include accounts such as "meals", of course, but also "office" (not to be confused with rent), and "hardware & small tools" expenses and etc., for which the sellers have been writing checks to themselves on a weekly basis. Now, if we could somehow verify those, I would be willing to pay up. But how does one do such a thing?
The sellers have tried to minimize their tax liability and so this is making the deal unbankable without some type of side-note for the sellers outside the SBA. How do I structure a side-deal where I can pay them for the gap in cash flows (add backs) IF the cash flows are what they said they'd be..... I want to trust them and I do, but really still don't feel 100% and it's likely due to my lack of experience in deal making...
Thanks in advance!!!
Add backs & gettting sellers to put their money where their mouth is?
by a searcher from The University of Chicago - Booth School of Business
More on Searchfunder
Searchfunder is an online community and toolkit for searchfunds. Over 80% of those involved in searchfunds maintain a Searchfunder.com account to help them network, problem solve challenges, and keep up with the industry.
We maintain partnerships with database providers that make searching more effective, efficient and affordable along with features that help searchers find deals and investors and vice versa.
We maintain partnerships with database providers that make searching more effective, efficient and affordable along with features that help searchers find deals and investors and vice versa.
Make sure it is expensed and not a distribution. Is it just one year or for many? Further, seller has many options to reduce the taxes depending on the business. So, why take this approach of weekly checks? Most sellers will have one or two entries, not easily discoverable 52 items and that too by checks.