{"ok":true,"canonical_url":"https://dealroom.so/glossary/bad-debt-reserves","api_url":"https://dealroom.so/api/public/glossary/bad-debt-reserves","data_freshness":{"sba_records_through":"2026-05-31","fdic_records_through":"2026-03-31","dealroom_last_updated":"2026-06-15","timezone":"America/Chicago"},"source_summary":["Public SBA 7(a) loan records","FDIC institution data","DealRoom lender and franchise enrichment"],"term":{"slug":"bad-debt-reserves","term":"Bad debt reserves","aka":"Allowance for doubtful accounts","group":"Reading the business","definition":"This is an accounting allowance for accounts receivable that are unlikely to be collected. It reflects potential losses from customers who won't pay their bills.","what_it_means":"When reviewing a target business's financials, analyze their bad debt reserves. A high or increasing reserve could signal issues with customer credit quality or collection practices. Understand how the seller accounts for these potential losses, as it impacts the true profitability and accounts receivable valuation.","url":"https://dealroom.so/glossary/bad-debt-reserves","official_sources":[],"related":[{"slug":"accounts-receivable","term":"Accounts receivable","url":"https://dealroom.so/glossary/accounts-receivable"},{"slug":"due-diligence","term":"Due diligence","url":"https://dealroom.so/glossary/due-diligence"},{"slug":"profit-and-loss-statement","term":"Profit and Loss Statement","url":"https://dealroom.so/glossary/profit-and-loss-statement"}],"related_questions":[{"question":"How is prior owner debt converted to equity treated for injection purposes?","url":"https://dealroom.so/for-lenders/questions/how-is-prior-owner-debt-converted-to-equity-treated-for-injection-purposes"},{"question":"Can I use an SBA 7(a) loan to refinance existing business debt?","url":"https://dealroom.so/sba-loans/basics/can-i-use-an-sba-7-a-loan-to-refinance-existing-business-debt"},{"question":"Can an SBA 7(a) loan be used to refinance existing business debt?","url":"https://dealroom.so/sba-loans/basics/can-an-sba-7-a-loan-be-used-to-refinance-existing-business-debt"},{"question":"Can I use an SBA 7(a) loan to pay off personal debt?","url":"https://dealroom.so/sba-loans/basics/can-i-use-an-sba-7-a-loan-to-pay-off-personal-debt"},{"question":"Does the SBA require a specific debt service coverage ratio (DSCR) for approval?","url":"https://dealroom.so/sba-7a/questions/does-the-sba-require-a-specific-debt-service-coverage-ratio-dscr-for-approval"},{"question":"What is the debt-to-worth ratio requirement for a $0-down partner buyout?","url":"https://dealroom.so/sba-7a/questions/what-is-the-debt-to-worth-ratio-requirement-for-a-0-down-partner-buyout"}]},"caveats":["Definitions represent DealRoom's plain-English interpretation for buyers; verify regulatory terms against the official SBA and eCFR sources listed.","Not legal, tax, or financial advice, and not an SBA eligibility determination."],"citation":{"label":"DealRoom.so Glossary — Bad debt reserves","url":"https://dealroom.so/glossary/bad-debt-reserves","source_type":"DealRoom Data"}}