Q: What do you do if the business tax returns are not filed for over one and a half years?
A: Tax returns placed on extension and delayed is common and another excellent reason to ask for and use the accrual financial statements. If you base your analysis on delayed tax returns, you are extremely limited in assessing the current status of the borrower. Every company worth banking uses accrual financial statements, as a general rule, and those statements are rarely more than a month delayed if prepared by an internal bookkeeper.
Q: When a lender has to calculate cash flow quarterly and the tax return is not filed for over one and a half years, then what?
A: Get the accrual financial statements, including the YTD interim income statement and the income statement and corresponding balance sheet for the current year. The interim statements are usually current or certainly current enough in virtually all instances since companies use interim accrual results continuously to assess progress and spot problems.
Course overview: Business Income Tax Returns and Cash Flow Analysis