How do lenders view add-backs?

searcher profile

June 22, 2022

by a searcher in Chicago, IL, USA

Im looking at a business that has been running at almost breakeven in NET, but the owner is running a considerable amount of expenses through the business to minimize his Net profit and tax burden (around 750k)

How do banks view these add backs when analyzing cashflow and ability to service debt? Would banks finance the deal?

Thanks

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commentor profile
Reply by a searcher
from Washington University in St. Louis in Chicago, IL, USA
Is the seller Willing to Offer Seller Financing? How is the adjusted EBITA look like after add-backs? I am in medical practice and see many Physicians do this.
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Reply by a lender
from University of Utah in Sandy, UT, USA
Add backs will need to be verifiable and show where the expense occurred on the P&L, but it can be done.
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