The seller says it earns this much. Here is what a lender will count.
Almost every business for sale is priced off an adjusted earnings figure the seller built themselves. Some of those adjustments are fair. Some quietly move an expense that never actually goes away. List them here and each one gets accepted, cut in half, or thrown out, with the reason in plain language, and then the deal gets tested against its own debt at the honest number.
Build the seller's add-back list, line by line
Step 1. The number the seller is asking you to believe
Take it straight off the listing or the adjusted profit and loss statement. This is the figure the price is built on, and it already includes every adjustment you are about to list below.
Step 2. Every adjustment they made to get there
Add one row per line on their add-back schedule. If they never gave you a schedule, that is the first thing to ask for, and the fact that it does not exist is already an answer.
Step 3. The two numbers, side by side
The left figure is the seller's. The right one is what survives when every adjustment has to prove itself. The distance between them is usually the whole negotiation.
Step 4. Does it still cover the debt?
A gap only matters if it breaks something. Put the deal terms in and the same coverage test runs twice, once on the seller's number and once on the honest one.
Most lenders want coverage of at least 1.25x, and 1.15x is the program floor, so anything between the two is a deal that needs its paperwork to be perfect. Coverage here is measured straight against your lender-view SDE, which is the friendly version: underwriting first subtracts a market wage for whoever runs the business day to day and a maintenance capital allowance, so a result that looks thin on this page is thinner in a credit memo. Standard amortization, level payments, no fees or closing costs included. Planning estimate on disclosed assumptions, not an offer, an approval, a valuation, or advice on a specific deal.
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New to the term? What SDE actually means, in one page. Structure question rather than an earnings question? The Stack Check tests whether the financing holds together. Every free tool lives in the toolbox.
What this page cannot see
This tool reads a list. It cannot read a general ledger. It does not know whether the seller's owner salary line matches the W-2, whether the one-time legal bill was one-time in a year you have not been shown, or whether the personal spending was ever really personal. Every judgement on this page is only as good as the list you typed into it, and the list came from the person selling you the business.
So use the result as a question generator, not a verdict. Each red row is a sentence you can say out loud: show me the invoice, show me the lease, show me the three years where this did not appear. Sellers who adjusted honestly answer those in a day. The answers you do not get are the finding. And when the numbers matter enough to be checked properly, the written deal read rebuilds them off the actual financial statements and tax returns instead of a typed list.
What is an add-back?
Why does the tool cut some add-backs in half instead of removing them?
Is this a valuation or a loan decision?
Found a gap you were not expecting?
Thirty minutes, free, in plain English. Bring the schedule you just built and the price. We will tell you which rows are worth arguing, which ones are worth walking away from, and what to ask the seller first.
Talk through your dealWant it done properly on the real statements? The written deal read.
No retainer required to talk. hello@clariqadvisory.com