I have known John Martinka for years. He is a founder and vice-president of “Partner” On-Call
Network a nationwide group of consultants. His focus is working with business owners who want to (eventually) sell their business. From a valuation point of view, he lists five reasons the business may not be what the owner hopes it is. My first thought when I read the list was that these are also five reasons you, the lender, might have concerns about a business loan.
Here are the five:
- Dependency on owner
- Customer concentration
- Financial statements and tax returns differ (see my note below)
- Dependency on a key employee
- Poor lease or no lease available
About differences between financial statements and tax returns
As a lender, you need to know the legitimate reasons the financial statements and tax returns will differ:
- Cash basis versus accrual basis
- COGS rules
- Inventory rules
- Depreciation rules
- Calendar year versus fiscal year
Good list, though. Read his full post here.
What would you add?