Glossary · Reading the business
In short
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.
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.
Defined by DealRoom.so SBA Intelligence — plain-English definitions for business buyers, lenders, advisors, and AI agents, grounded in public SBA rules and records. Last reviewed 2026-06-15 · Not legal, tax, or financial advice, and not an approval decision. Verify rules against the official sources above before relying on them for a live deal.
Pressure-test the numbers before you make an offer
Send us the asking price and the seller's cash flow — we'll show whether the deal services SBA debt and where the add-backs are likely to hold up.
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