Allowable add-backs directory
What underwriters accept, what they accept with evidence, and what they reject. Each entry carries the rule, the evidence and the objection you will hear.
Status
18 of 18 entries
Owner excess salary
Owner compensation
Compensation paid to an owner above the documented market cost of a replacement manager.
allowable
Owner and family health insurance
Owner compensation
Premiums for the owner and family paid through the business that a buyer or new manager would not incur.
allowable
Personal vehicle expenses
Personal expenses
Lease, fuel, insurance and depreciation on vehicles used primarily for personal purposes.
conditional
Personal travel and meals
Personal expenses
Travel, meals and entertainment that were personal in nature but run through the business.
conditional
Non-recurring legal and settlement costs
One-time items
Litigation, settlement or legal fees tied to a resolved matter that will not recur.
allowable
One-time facility move or build-out
One-time items
Expensed costs of relocating or building out a facility that will not recur after the move.
allowable
Depreciation and amortization
Non-cash
Non-cash expense recognized on the return, added back for EBITDA and cash flow.
allowable
Interest expense
Non-cash
Interest on existing debt that will be refinanced or is already in the debt service calculation.
allowable
Section 179 and bonus depreciation
Non-cash
Accelerated first-year depreciation elections that distort reported net income.
allowable
Owner charitable contributions
Discretionary
Donations made at the owner's discretion that a new owner would not be obligated to continue.
allowable
Non-working family members on payroll
Owner compensation
Salaries paid to family members who do not perform services.
conditional
Rent paid above market to a related party
Related party
Rent paid to an owner-controlled EPC that exceeds market rent.
conditional
Projected cost savings
Speculative
Savings a buyer or owner expects to achieve in the future, such as renegotiated contracts or headcount cuts.
disallowed
Unreported cash revenue
Speculative
Income the owner claims to have received but did not report on the return.
disallowed
General market condition adjustments
Speculative
Adjustments for a bad year attributed to the economy, weather or competition without a specific documented event.
disallowed
Owner retirement contributions
Owner compensation
SEP, SIMPLE or profit-sharing contributions made for the owner's benefit.
allowable
Expenses of non-operating assets
Non-operating
Costs of assets not required for the business, such as a vacation property or boat held in the entity.
allowable
Non-recurring bad debt write-off
One-time items
A single large customer write-off that is not part of the normal loss pattern.
conditional
Rate every add-back before the lender does.
The add-back normalizer applies this directory to your deal and attaches the evidence inline.