the add-back that won't die.
four years after PPP loans expired, COVID-era EBITDA add-backs are still showing up in CIMs. we've seen three this month alone.
on a $5M EBITDA business at 6.8x, a $300K add-back inflates the purchase price by over $2 million. that's the game.
the pitch is always the same: "one-time, non-recurring." but when you've been saying that since 2021, it stops being one-time. it's a pattern. and every buyer who doesn't catch it is overpaying — not by a little, by a multiple of the add-back itself.
here's what we're seeing:
- "COVID-related revenue disruption" — still in 2026 CIMs, still being used to normalize top-line declines that never recovered.
- "PPP loan forgiveness income" — added back to EBITDA as if it were operating noise. it wasn't. it was free money. removing it makes the business look worse, which is the point.
- "Owner travel and discretionary expenses" — the classic. except the new owner will travel too. and they'll have expenses too.
none of this is illegal. most of it isn't even unusual. but that's what makes it dangerous — it's normalized. bankers include it because sellers expect it. buyers accept it because the model already has it baked in. and the deal closes at a price that doesn't reflect the actual cash flow of the business.
the fix isn't complicated. run the model without the add-backs. if the deal still works, fine. if it doesn't — that tells you something.
— the editors