Quick answer: A lender is more likely to rely on earnings that can be reconciled across financial statements, tax returns, BAS, bank activity and recent management results. Vendor forecasts and sale memoranda can support the story, but they do not replace verifiable historical evidence.
The fastest way to lose an acquisition-finance opportunity is to discover late that the vendor’s “adjusted profit” cannot be reconciled to the accounts. Do the lender-style due diligence before committing to the capital structure.
Have a target business in mind? Send the transaction for a financeability check before making the funding assumption part of the offer.
Worked example: reconciling the vendor story
Illustrative only.
| Item | Position A | Position B / credit question |
|---|---|---|
| Information source | What it says | Credit question |
| Sale memorandum | Adjusted EBITDA $320k | Which add-backs create the difference? |
| Financial statements | Operating profit $245k | Are expenses complete and recurring? |
| Tax returns / BAS | Revenue broadly consistent | Does lodged data support the accounts? |
| Recent management accounts | Sales up 12% | Is the improvement visible in bank activity? |
Build one reconciled earnings bridge
Start with the signed or accountant-prepared accounts, then bridge to the proposed normalised earnings. Each add-back should have a dollar value, evidence and an explanation of why it will not recur.
Recent trading matters when the business has changed
A lender may ask for current management accounts or bank statements if the historical year no longer represents the business. Growth can help, but only if the new run rate is credible and sustainable.
Check balance-sheet liabilities, not just profit
Equipment debt, leases, ATO liabilities, employee entitlements and supplier arrears can affect the opening position or settlement adjustments. The buyer needs to know which liabilities remain, which are paid out and which assets transfer.
Commercial due diligence and credit due diligence overlap
Customer concentration, key-person dependence, lease expiry, supplier concentration and licence/franchise conditions can all affect whether the future cash flow is transferable to the buyer.
What to do next
Request an acquisition-finance review with the sale memorandum, latest financials and asking price. The goal is to test financeability before a formal credit enquiry.
Frequently asked questions
Will a lender rely on the vendor’s adjusted EBITDA?
Only to the extent the adjustments are credible, evidenced and acceptable under the lender’s assessment.
Are BAS statements enough?
Sometimes they help verify turnover, but they do not replace every other document in every acquisition.
Can recent management accounts support higher earnings?
They can help explain a changed run rate, subject to verification and lender policy.
What should be reconciled before applying?
Revenue, profit, add-backs, existing debt, ATO liabilities, stock and any material difference between the sale memorandum and lodged financial information.
Sources and verification
Related GPS Finance guides
- Target-business profit and serviceability
- Business acquisition working capital
- How much deposit to buy a business?
General information only. Business and commercial lending policy, pricing, security, guarantees, documentation and approval vary by lender and transaction. Examples are illustrative and are not credit, legal, tax or accounting advice.
Need help matching this to a business-finance option?
GPS Finance can review the funding purpose, conduct, documents and lender fit before you make a formal enquiry.
