SBA Financing - Significant Add-backs to SDE

by a searcher from Boston College - Wallace E. Carroll School of Management

1 year ago

Hi, I'm currently looking at an add-on acquisition with about $200K in net income on the P&L but another roughly $175K in add-backs. I've done my diligence and believe the seller to be an honest operator - so I am fairly comfortable that these add-backs are valid.

My question is, does this amount/ratio of add-backs to SDE present significant issues with obtaining SBA financing? Aside from this potential obstacle, I think this deal is a fairly good fit for SBA financing but am unsure how much of an issue this is or isn't.

1 like
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37 comments

searcher from Symbiosis International University

It is both in my experience. Even if you can validate a charitable donation it does not mean that was purely a charitable donation - it could have been a source of gift to secure business. If add backs is higher than a reasonable margin then the business lacks integrity - before banks do it, I will trash out the deal.

6 months ago | like reply | 0 likes

intermediary from University of Texas at Arlington

Ask for supporting documents for the $175K in add-backs. - i.e. invoices, contracts, etc.

6 months ago | like reply | 0 likes

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