SBA/Ebitda questions

December 19, 2025

by a searcher from Le Moyne College in Atlanta, GA, USA

Hey all - negotiating a purchase now with a service business that hasn’t optimized his ebitda for valuation but for tax minimization. We know the cash flow is much higher than what sba can verify on tax returns. How is this usually handled? Are we able to buy for the higher price?

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Reply by a lender
in Raleigh, NC, USA

For SBA financing, the valuation has to be supported by verifiable cash flow not what the seller says the business “really makes.” As a lender, I can only use what’s actually reflected on the tax returns or financial statements. Anything off‑books, cash, or personal expenses that are added back without proper documentation won’t count toward EBITDA for underwriting. You can pay more than what SBA will support, but the difference typically has to come from buyer cash or a seller note, often on full standby so it doesn’t hurt the business’s cash flow. And lenders will want to understand why a buyer is comfortable paying above what the verifiable numbers justify. If the seller minimized taxes and didn’t plan their financials ahead of the sale, unfortunately that’s a seller issue SBA lenders can only work with what’s documented.

Reply by a lender
from California State University, Sacramento in Seattle, WA, USA

I couldn’t tell from your comments if the seller is hiding top line revenue and not reporting top line and/or just running personal expenses through the company. A QOE can help document some amount of reasonable seller discretionary expenses. But a no-go if the seller is also wanting to show the second set of books that bring more revenue top line into the mix that hasn’t been reported to the IRS. Maybe supporting some amount of industry standard seller ‘addbacks’ is probably ok. But outright tax fraud not ok. redacted

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