Has anyone had experience with valuations that are based on reported and unreported income? I don't imagine a lender or investor would appreciate the rationale that the valuation seems high because it's based on all revenue, not just the stuff that's reported on taxes. For scale, the unreported income would increase SDE by ~20%. Is this a common practice in business with lower valuations ($1-5M)?
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Unreported income on tax returns would be (should be) a NO THANK YOU for SBA lenders. No pass go. Maybe alternative debt can help? Buy I’m +1 to David Jacobs as I think he’s offered good advice from the sell-side.
10%+/- is a considered 'within range' as it is perfectly acceptable to push off revenue and bring forward expenses by a couple of days to alter the taxable income within a specific year. Of course, lots of unreported cash income or excessive personal expenses (home mortgage, vacation homes, luxury cars and boats) is a flashing red light and I'd walk away as a broker.