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Small Business Administration 7a Loans.


Lets look at this first: The SBA has processed a record of 52,000 loans worth approximately $23 billion in FY2019. This means more individuals are buying and selling businesses.  Amongst the many actions that must take place before, during, and after the transaction, a business valuation is one of the most important tasks that needs to be done.


A business valuation assists the buyer in deciding whether the asking price is supported by an independent, unbiased, and qualified source.  Closing delays occur when there is not a qualified valuation firm performing the valuation.  A business valuation follows generally accepted valuation methodologies and professional standards that provides certain guarantees to the lender. According to the SBA lending program rules, the business valuation must be requested by the lender and not the seller or the loan applicant.


So, what or who is a qualified source?  In SBA SOP 50-10-5(H) that is defined as “an individual who regularly receives compensation for business valuations” and is accredited by one of the following:

  • Certified Valuation Analyst (CVA) accredited through the National Association of Certified Valuation Analysts

  • Accredited Senior Appraiser (ASA) accredited through the American Society of Appraisers

  • Certified Business Appraiser (CBA) accredited through the Institute of Business Appraisers

  • Accredited in Business Valuation (ABV) accredited through the American Institute of Certified Public Accountants

  • Accredited Business Certified Appraiser (ABCA) accredited through the International Society of Business Analysts.


The SOP also describes two categories states who must complete the business valuation in each situation.  When the loan is less than $250,000, the lender may perform its own valuation of the business.  However, if the loan exceeds $250,000 or if there is a close relationship between the buyer and seller, family for example, the lender must get an independent business appraisal form a qualified source.


Typically, the valuation firm will need documents similar to those used for the loan application and they will probably include:


  •      3-5 Years of Company tax return

  •      Interim Statements (within 90 days of valuation date)

  •      AR and AP Aging

  •      Management forecast or budgeting (when available)

  •      Completed valuation questionnaire.

  •      Purchase Agreement or LOI.

  •      Internal loan write-up.


Buying or selling acompany with an SBA guaranteed loan require action items. Do not delay the valuation process.  Get with the lender about finding a trusted and certified valuation firm early on in the process and have the comfort that you will get your appraisal done in the appropriate amount of time. We are here to help. We are Accredited in Business Valuation by the AICPA with extensive experience in buy-sell valuations.

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