My team and I have been looking at a deal that involves acquiring a construction company that brings in 4-5m in revenue but the owner tends to use check cashing services. Why does he do this?

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My only thought is if the guys he pays prefer being paid in cash?

I’ll explain, most construction companies have 2 books. One for IRS, which most would never cheat but state agencies such as worker’s compensation they do all the time because the more the workers work the more insurance can charge. Also, it’s common practice to pay workers in cash so they don’t have to pay them for overtime. ( I’ll pay you in cash so your crazy ex wife doesn’t get so much in child support or you don’t lose the government benefits but you can’t charge me over time and I save money on the backend with no getting charged by insurance ) . Personally, I like to do everything by the book, but this happens in the majority of small to medium size construction companies.

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Agreed usually it involves them pay them for example $500 a week check and $200 cash so they show some income but I would. Or trust a company for $5M under these types of accounting issues. I had a construction company with national accounts and I kept everything legit. Also how do you know the real operating expenses if everything is being massaged to look good. Make a low ball offer and walk away.

Sounds like a common problem occurring at the business banking level for cash businesses

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