reply
by a lender
2yrs ago
from Eastern Illinois University
in 900 E Diehl Rd, Naperville, IL 60563, USA
Great question. If you are buying a business and not using debt, I would still request the tax returns from the seller. Even if they have not completed their most recent tax period, I would recommend including in the purchase that they are required to get you their final tax return when completed. It becomes even more vital to have the tax returns if you do not have historical reviewed or audited financial statements from a qualified accounting firm.
When you go back to get traditional financing most lenders are going to rely on either reviewed or audited financial statements or the tax returns. Tax returns represent what a company is reflecting to the government that their revenues, expenses, and cash flow was, and lenders require something they can rely upon comfortably for lending purposes. It will be hard to get them to do a deal without seeing the historical revenues, income and cash flow of the business.
One option you might have if you did a stock or membership interest purchase would be to complete a 4506-T, which is a request for copy of transcripts from the IRS. The lender could then get the transcripts. However, it could be hard to complete this form as the details on this form must match up what is on the tax return, and if you do not have a copy of the tax return or you did not do a stock or membership interest purchase, you likely cannot get transcripts. Outside of having that information, I would stay on the seller and request the documents or try their accountant. Good luck.
