Hello Searchfunder Community,

This has always been a very helpful community so I thought I'd pose my situation here to crowdsource some creative ideas.

There is a good opportunity that I've found (recurring revenues, high gross profits, great industry, upside potential, etc.), but the seller has been running a ton of outside expenses through the business. Think significant travel, meals, rental properties, personal vehicles, etc. They have done this to such a significant extent that the business shows nearly zero net income even though the adjusted EBIDTA after addbacks is $1M to $1.5M.

Due to these addbacks, I don't think that the business is bankable as most lenders will want to see receipts for every transaction or amended tax returns. That being said, I think this is a good business on the surface and if I can find a creative way to get a transaction done, I think I will have an edge vs other buyers who see these issues and immediately walk away.

My question to the community is this: is there something that I can do to try to validate these expenses are personal to enough degree that I can get an SBA lender to lend on the transaction?

Some ideas I had are:

1. Agree with the seller on multiple on EBITDA and get an audit done where an independent party validates the last years expenses and anything that isn't verifiable is counted as a business expense and therefore reduces EBITDA.

2. Perhaps there is an opportunity to "play the long game" and tell the seller to operate the business for ~3 months without running these expenses through the business, and maybe there's a creative lender that would see this as sufficient?

3. The seller is open to seller financing of sorts, but wouldn't want to peg anything around profitability as they do not control future ownership decisions. Is there a type of seller financing that might sense here that I'm not thinking about?

I appreciate all of your thoughts and ideas on a creative path forward!