MAXIMUM EARNING POWER

Recasting earnings simply means redoing your financial statements to show what your business could have earned--its maximum earning power--in any given year. As a private business you try to minimize taxes. Taxes are based on income, so it's only natural that you tried to keep your income reasonably low. Great. But low income is not exactly what you banker wants to see.
Adjust your income statement to show what your profit could have been if the company hadn't paid for your car and insurance.

Adjust for the money you spent to sponsor your son's Little League team. Adjust for the money you contributed to your spouse's favorite charity that benefited a good cause (and also helped maintain harmony at home). Adjust for the bonuses you paid to your key managers that were not required to be paid. In other words, adjust for everything that was not an absolutely necessary business expense. Look for expenses that could be eliminated, even though you might not choose to eliminate them, and still allow you to run your company successfully.

In particular, look very carefully at your own salary and the salary of any relatives on your payroll. As the owner you can take as much cash as you want out of the company. But if what you are taking in salary and bonuses exceeds normal standards for your industry, your company is showing less profit then it is actually making. This may make sense from a personal standpoint, but, again, this is not what you want to show your banker.