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During a recent review, William MCDonald, an Associate with The Mae Group (www.themaegroup.com) emphasized the need for the complete and accurate disclosure of financial records and tax returns when selling a business.
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During a recent review, William MCDonald, an Associate with The Mae Group (www.themaegroup.com) emphasized the need for the complete and accurate disclosure of financial records and tax returns when selling a business.
“Many small businesses, especially those which deal primarily with cash transactions, do not keep accurate records. This presents a big problem when attempting to sell a business, buy a business or obtain financing,” MCDonald said. He cautioned buyers not to consider purchasing an established business at a price that cannot be justified by tax returns for recent years. “This is especially true,” he said “if you need to finance the purchase.” MCDonald stated that with good startup he equity, a good business plan and utilization of a government guaranteed loan program such as those provided by the Small Business Administration, it can sometime be easier to obtain financing for a new business that to borrow funds for the purchase of an existing business which cannot demonstrate a qualifying level of profitability. “Buyers should shy away for sellers who represent that a business is earning much more than the tax returns show,” MCDonald said, “because that representation will definitely not fly with a lender.” Mr. McDonald is an Associate with The Mae Group (www.themaegroup.com), a leading investment banking firm in Central Florida.
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