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Liability associated w/ projections to bankers?

Technical topics regarding tax preparation.
#1
CO CPA  
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I have a client that has an SBA loan that is bound by covenants. He'd like to sell a substantial portion of his equipment that is secured by the loan and purchase other equipment which he has to get permission to do. The bank is asking the client for income and cash projections which I have for tax and operating purposes. My projection assumes revenue for the remainder of 2020 will be the same as 2019; however, I in no way can guarantee this of course. I'm worried that even with a disclaimer on the projection that I'm opening myself up to liability should the client default on the loan, which has a higher likelihood than average because the client is a terrible money manager and declines to act on my advice most of the time. Opinions? Should I call my liability insurance company?

Thanks for any thoughts you have on this!
 

#2
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CO CPA wrote:Opinions? Should I call my liability insurance company?


If you think you want to provide this service for your client, yes.

I don't think I'd want my firm's name on anything like that... especially in the current (uncertain) environment.
 

#3
JR1  
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No way no how would I ever ever no not ever provide projections to a bank. Have the client provide them.
Go Blackhawks! Go Pack Go!
Remembering our son, Ben Jan 22, 1992 to Aug 26, 2011.
For FB'ers: https://www.facebook.com/groups/BenRoberts/
 

#4
CO CPA  
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Thanks all for the responses. I'll send the tax projections to the client and he can do whatever he would like with them. I'll label it PROJECTION FOR TAX REPORTING PURPOSES. Not sure how much that helps but it's something.
 

#5
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Your still providing this service to a client that you already know darn well what he is going to do with it. It's going to the bank unless your signed tax projection engagement letter specifically states that the projection is for his internal use only and can not be provided to any third parties without your prior written permission.

Agree with ManvsTax and suggest you call your liability insurance company.

When I first read your post - that was my initial conclusion and now with what you have just posted - it only confirms that initial conclusion.
 

#6
deniz  
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It doesnt even sound like your work product is at the point where you can refer to it as a financial projection, so I am not sure what you would be asking the insurance provider.

Here is AT Section 301 Financial Forecasts and Projections

https://www.aicpa.org/content/dam/aicpa ... -00301.pdf

Either your work complies with the standard or it does not. If it does not, you do not have financial projections to provide to your client. So, either you engage with him to create compliant forecasts or you tell him you dont have anything.
 

#7
JR1  
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I'm with Michaelstar here....there are words to the effect that when you do things that you know will be used by a third party....you're hosed. That's the non-technical term. Again, I will NOT do these projections. I will help the client do them, or review their work for obvious questions and errors. But it's the client's work. Not mine. No not ever.

There are three outcomes, two suck. 1. He gets the loan and makes the payments. 2. He doesn't get the loan and it's your fault. 3. He gets the loan and defaults.
Go Blackhawks! Go Pack Go!
Remembering our son, Ben Jan 22, 1992 to Aug 26, 2011.
For FB'ers: https://www.facebook.com/groups/BenRoberts/
 

#8
rotsky  
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JR1 wrote:No way no how would I ever ever no not ever provide projections to a bank. Have the client provide them.


Ahhh. The rare "triple-negative". Well done!
 


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