SBA Loans & Financing
Depending on the loan amount and whether it pertains to a business ownership transfer, a business valuation may be required to satisfy the underwriting process of the SBA. This requirement is determined by your the lender and the specific SBA loan program. The business valuations performed for these purposes must comply with the SBA's operating procedures (SOP 50 10 5J, Chapter IV, Section E), which require appraisal completion by a "qualified source," an individual who regularly receives compensation for business valuations and is accredited by one of the professional organizations recognized by the SBA. In addition, specific information must be considered in the valuation.
At FairValue Advisors, we provide business valuation reports that specifically comply with the SBA loan requirements and our experts hold the necessary certifications.
For larger (non-SBA) loans, a business valuation can be used by the lenders considering a cash-flow based loan whereby the business itself is used as collateral. In many cases, the lender may also receive warrants in the Company, which can also be appraised. This is more typical for entities that have a low tangible asset base that can be used as collateral.
We only employ valuation methods that are proven and accepted in the marketplace and in the courtroom. The appropriateness of the cost, market and income approaches to valuation are considered in each appraisal assignment.