Hey everyone. I'm selling my HVAC company and wanted to share what I did to get my books SBA-ready on the first shot. My bank's credit officer was actually impressed. I spent about 6 weeks cleaning up QuickBooks: separated personal expenses, reconciled every month for 3 years, got a proper P&L and balance sheet, and had my CPA do a review engagement. Also made a simple add-back schedule for owner's salary and one-time expenses. The buyer's lender said it was the smoothest package they'd seen in months. Not saying it's easy, but it's doable if you start early. Happy to share the checklist I used if anyone wants it. What's your experience been?
SBA
How I prepped my bookkeeping to pass SBA bank requirements on the first try
Nice job. The add-back schedule is where most sellers trip up. They forget to document why that $30k ‘consulting’ payment to their brother-in-law was a one-time thnig.
Six weeks? I’ve been trying to get my old accountant to return a call since March. You must have found a good one.
YardSaleYoda – Ha, it took me three tries to findd a CPA who actually understood SBA. First two were useless. The one I ended up with does a lot of work with franchise buyers, so she knew exactly what the banks want.
Did the bank require a full review engagement or was a compilation enough? My lender said compilation but I’ve heard others insist on review.
SprocketHound – Mine required a review. It cost about $3k but definitely helped. The buyer’s bank didn’t even blink at the numbers after that.
I’m a broker and honestly the biggest issue I see is sellers who haven’t reconciled their bank accounts in years. Drives me nuts. Good on you for doing it right.
Wait, you can separate personal expenses? I just bought a boat through my business last year. Is that… bad?
DustyTrombone – Only if you enjoy explaining to an SBA underwriter why your ‘company vehicle’ is a 28-foot Sea Ray.
QueenBeeCircus what’s the typical cleanup timeline you see for sellers who are a mess? Asking for a friend.
YardSaleYoda – 3 to 6 months if they haven’t kept up. And that’s with a bookkeeper doing weekly catch-ups. The ones who try to DIY it in two weeks before listing usually end up re-listing six months later.
I went through this last year. The add-back schedule was fine, but the bank also wanted a written explanation for every single deposit over $5k. That was a nightmare. Took me a full weekend just writing ‘customer payment’ 47 times.
GruelAndUnusual – Ouch. I forgot about the large deposit thing. My bank asked for that too. I ended up making a spreadsheet with invoice numbers next to each deposit. That seemed to satisfy them.
Honestly the biggest surprise for me was how muuch they cared about the balance sheet. I thought it was all about the P&L. My first pass got rejected because inventory was way off.