SBA Business Valuation
Our SBA Business Valuation services are prepared to determine the value of a business in connection with SBA-guaranteed and conventional bank financing. The valuation is developed to support lender underwriting requirements and reflects the structure of the proposed transaction, including whether the transaction is structured as an asset sale or an equity sale and which assets and liabilities are included.
An SBA Business Valuation provides an independent and objective assessment of value that aligns with lender expectations and regulatory standards. Lenders rely on a well-supported valuation to assess transaction pricing, repayment capacity, and overall risk associated with the loan. Our analyses are designed to produce a clear, defensible conclusion of value that can be relied upon by borrowers, lenders, attorneys, and other parties involved in the financing process.
Business valuations prepared for SBA and bank financing differ from valuations prepared for internal planning or tax reporting purposes. In a financing context, the valuation must address the economic realities of the transaction and provide lenders with confidence that the purchase price or ownership transfer is supported by market data and sustainable financial performance.
A properly prepared valuation considers the company’s historical and normalized earnings, balance sheet strength, industry conditions, competitive position, and operating risks. The analysis focuses on the company’s ability to generate consistent cash flow sufficient to service debt obligations while maintaining ongoing operations. A thorough SBA Business Valuation helps reduce uncertainty in the lending process and supports timely loan approvals.
METHODOLOGY
Each SBA Business Valuation is prepared in accordance with generally accepted valuation standards commonly relied upon by financial institutions. The valuation methodology is selected based on the nature of the business, the quality of available financial information, and the transaction structure. One or more valuation approaches may be applied, including the Income Approach, the Market Approach, and, when applicable, the Asset-Based Approach.
Under the Income Approach, value is assessed based on the company’s ability to generate future economic benefits, typically through capitalization of earnings or discounted cash flow analysis. The Market Approach estimates value by reference to pricing multiples observed in comparable business sales and market transactions involving similar companies. In certain cases, particularly for asset-intensive businesses, an Asset-Based Approach may also be considered to evaluate the fair value of the company’s underlying assets and liabilities. The selected approaches and their relative weighting are fully explained in the valuation report and tied directly to the economics of the proposed transaction.
FINANCIAL STATEMENT NORMALIZATION ADJUSTMENTS
Historical financial statements are reviewed and adjusted, where appropriate, to reflect normalized operating results on a market-participant basis. Because financial statements are often prepared for tax or internal reporting purposes, they may include non-recurring, discretionary, or owner-specific items that do not reflect the company’s sustainable earning capacity.
Normalization adjustments may include owner and related-party compensation, discretionary or personal expenses, non-recurring or non-operating items, and related-party transactions, including rent. These adjustments are made to present financial results that reflect market-based terms and provide lenders with a realistic view of the company’s ongoing cash flow and repayment ability.
INFORMATION REQUIRED FROM THE CLIENT
To complete a defensible SBA Business Valuation, we typically request federal tax returns or financial statements for the past three years, the most recent interim financial statements if available, and a completed questionnaire covering the company’s operations, ownership structure, and management. Depending on the transaction and lender requirements, additional documents may be requested following the initial analysis.
TIMELINE AND DELIVERABLE
Most SBA Business Valuation engagements are completed within 2–3 weeks, depending on the complexity of the business and the availability of information. The final deliverable is a comprehensive written valuation report prepared to support SBA and bank loan underwriting and financing decisions.