Sorry to have gotten off track. Let me try again.
First, the issue of POF is normally a catch-22, particularly with larger deals. You want the Seller to send you his Financials or Tax Returns, but he does not want to send out sensitive information without knowing he is dealing with a responsible (meaning capable) Buyer. There are very few ways around that. We traditionally send out P&Ls that are transcribed or with the name blacked out, so the Buyer does not know the identity of the Selling Company until we are satisfied that we have a legitimate Buyer. But there is no other way around it that I know of, and it frequently causes problems. It used to be easier when the Bank would send a letter saying that you were at least minimally qualified for a loan of up to $XX. But no more of that!
If you know what you are doing, the first paragraph of your last communication is relatively easy to deal with, IF YOU CAN GET TAX RETURNS. From that, you can run your own Cash Flow analysis, without benefit of an Accountant. The rough numbers are not sufficient to do an offer, in my view; but they can provide you with enough information to allow you to determine whether the Seller is giving you a generally acceptable price, or whether he is smoking funny cigarettes. And that will tell you whether it is warranted to justify getting the Accountant involved and paying him/her for further investigation.
Remember that ANY Seller is going to jack up the price somewhat, because of the nature of Buyers. It is part of what we call in the trade, "the Game". (Realize I am being somewhat sarcastic, here.) If you have a Business that is legitimately worth $500,000, and you put it up for sale at $10.00, some chucklehead would offer $8.00! The difference between your own, superficial Cash Flow analysis and the Seller's Price can be off, just because he is loading in a negotiation factor.
The key here is that, if you can use his SIGNED Tax Returns, you are safer than any other documentation, as I said in my last tirade. (That part, at least should have answered some of your questioning.) Because his Tax Returns will demonstrate the minimal profit he is willing to show to the IRS. Very little in the way of profit exaggeration should appear there.
I did not roll my eyes at the FSBO line. I did, however jump out of the window, but I was on the first floor when I did that, so all I did was scrape my knee. But I digress... I have always said that you do not ALWAYS need a Broker. And frankly, Sellers are better served by Brokers than Buyers are, anyway. But forget that - that is not the issue.
Yes, you can offer more than his asking price. But depending upon the price, doing so can screw up your Cash Flow Projections and hinder your ability to make your note payments, or pay yourself a decent income. You can also price it so high that no lender will consider a loan, on that basis. Terms concessions would be a better way to go if possible, particularly if there is a tax advantage to the Seller to be had.
It does take more money now to make money, than ever before. There are a lot of Angel Investors out there, (many because of a distrust of Wall Street,) usually selecting businesses by Industry. They want to invest in lines with which they are comfortable and knowledgable. Mezzanine Lenders are getting 12% to 14% on their money. We are doing quite a few of those (relatively speaking) with the Motel transactions we do. No Bank wants to lend to Motels, even with the property as security.
How they are done is nebulous. It depends on the Investor and the type of business. A lot of what we are doing is a combination. I am signing one this coming week where the Land Owner is joint venturing with a Developer. The Land Owner is putting his Property up, the Developer is putting in some Cash, a Mezzanine Investor is putting up another third in Cash, and the Bank is taking about a 60% stake in it. It is all over the freaking place to get these done.
Business Owners, if they know anything, need to agree to take a large portion of their price in Financing the deal. Yes, the SBA is still around. Yes, some deals can be financed conventionally. But more and more, the Buyer and Seller are being left largely to their own devices.
I am not certain this helps any more than before. If you want to talk this through in an effort to give and get a better understanding, I would be happy to do so. And I can assure you that no obligation and no cost would be incurred by you. The number is available through my Web Site. Monday evening or Tuesday at any time during the day next week are best.