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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?

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Linda Keith, CPA


Linda Keith CPA is an expert in credit risk readiness and credit analysis. She trains banks and credit unions throughout the United States, both in-house and in open-enrollment sessions, on Tax Return and Financial Statement Analysis.
She is in the trenches with lenders, analysts and underwriters helping them say "yes" to good loans.
Creator of the Tax Return Analysis Virtual Classroom at www.LendersOnlineTraining.com, she speaks at banking associations on risk management, lending and director finance topics.

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