# Off-balance-sheet obligations

Commitments a company owes that its [balance sheet](https://searchspheresource.com/glossary/balance-sheet) does not show.

Small-company books are kept for the tax return rather than for a buyer, so the commitments that matter most often sit outside them. Look for [personal guarantees](https://searchspheresource.com/glossary/personal-guarantee) the owner signed, equipment on operating leases, a deferred-payment arrangement with a supplier, an [earnout](https://searchspheresource.com/glossary/earnout) still owed on something the seller bought, and an unfunded promise to a departing employee. Every one of them is a claim on the cash you are underwriting. Ask for the lease schedule, the loan agreements and every contract with a payment in it, then put those payments into the debt service you are modeling.

In numbers: Four operating leases at $1,900 a month add $91,200 of obligation over two years that never appears as debt anywhere on the balance sheet.

Source: https://searchspheresource.com/glossary/off-balance-sheet-obligations
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