SBA Loans Require An Independent Valuation—The Chattanoogan

Find Out the Specific Requirements a Valuation Needs to Include to Pass Muster with the SBA

Matt Stelzman explains in The Chattanoogan that the Small Business Administration (SBA) has loans available that can help small businesses make it to profitability, self-sufficient revenue, or at least the next round of funding  —  but in every case these loans require independent valuations.   Here’s more: 

“The Small Business Administration maintains a variety of loan programs to help businesses obtain financing on favorable terms. For small businesses interested in acquisitions, the popular 7(a) program offers SBA-guaranteed business acquisition loans with competitive interest rates, extended repayment terms and other benefits.

Under current SBA regulations, these loans require an independent business valuation from a qualified source if: 1) the amount being financed (less the appraised value of real estate and equipment) is more than $250,000, or 2) there’s a “close relationship” between the buyer and seller (for example, they’re business partners or family members). The independence requirement means that it’s risky to rely on valuations performed by brokers or other parties with an interest in the transaction’s outcome.

A “qualified source” is someone who “regularly receives compensation for business valuations and either: 1) is a licensed CPA that performs the valuation in accordance with the AICPA’s Statement on Standards for Valuation Services, or 2) has earned one of several valuation credentials, including accredited senior appraiser, certified business appraiser, accredited in business valuation or certified valuation analyst. 

There are a number of other requirements that independent valuations need to comply with.  Find out what they are by reading the whole piece here. 

Small businesses can gain needed help from the SBA when they provide an adequate independent valuation.  Here’s how.