FINANCING OPTIONS
It is important that a buyer or seller know the value of a business. If the SBA, a conventional bank, or seller is financing, both buyer & seller should have a clear idea as to the function of cash flow.
Below is a preview. It is advised for both buyer & seller have an accountant to verify information.
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1.
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Gross Revenues
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5.
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Cash Flow/Net Profit Pre-Tax
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-Cost of Sales
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-Interest Payments
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Gross Profit
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-Depreciation
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-Operating Expenses
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Taxable Income
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-Debt Service
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x Tax Bracket
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Cash Flow/Net Profit Pre-Tax
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Taxable Loss/Income
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2.
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Owner Salary
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6.
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Cash Flow pre-Tax
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+Interest Expenses
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- Taxable Loss
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+Depreciation
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After-Tax Cash Flow
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+Fringe Benefits (car, trips, credit cards, not related to the business)
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Total Owner Benefit
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3.
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Triple Net Lease Payment (Annual Outflows)
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+Annual Lease Expenses
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Annual Lease Expense, Pre-Tax
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4.
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Annual Lease Expense, Pre-Tax
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x (1-Tax Bracket)
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Lease Expense per Year After-Tax
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EBITDA: Represents income before Income Taxes, Interest Expense, Interest and other income and depreciation and amortization. EBITDA is presented as additional financial data but may not be representative of operating results or cash flows for the periods presented.
