SBA 7(a) Loan Business Valuations

Independent business valuations that meet SBA SOP requirements for 7(a) acquisition loans. Lender-ready, CVA-certified, delivered on lender timelines.

What this engagement is

When a buyer finances a business acquisition with an SBA 7(a) loan, the SBA requires an independent business valuation whenever the amount financed, less the appraised value of real estate and equipment, exceeds $250,000, or whenever the buyer and seller are close parties. The valuation exists to protect the lender and the program: it confirms that the price being financed is supported by the earnings and assets of the business, not by the enthusiasm of the parties.

This is a lender engagement with a hard deadline attached. The loan does not close until the valuation is in the file, and every week of delay costs the buyer, the seller, and the lender money. We built our SBA practice around that reality.

Who orders it

The lender orders the valuation, not the buyer or the seller. SBA rules require the lender to engage the appraiser directly so the analysis stays independent of the parties to the transaction. In practice, we work with the lender’s closing team from engagement letter to delivery, and we keep the loan officer informed of exactly where the report stands. Buyers and sellers are welcome to call us with questions about the process, but the lender is the client.

What standard governs it

SBA Standard Operating Procedure 50 10 sets the requirements: the valuation must be prepared by a qualified source, and a Certified Valuation Analyst (CVA) credentialed by NACVA meets that definition. The analysis itself is prepared under NACVA professional standards. That combination matters at the closing table. A report from a credentialed analyst, prepared to a recognized standard, moves through SBA review without the back and forth that an unqualified opinion invites.

What the deliverable looks like

You receive a written valuation report that identifies the standard of value, describes the business and the transaction, presents normalized earnings with every adjustment shown, applies the approaches that fit the company, and reconciles them to a concluded value. The report is built to answer the questions an SBA reviewer actually asks. If the concluded value does not support the contract price, we say so plainly and show the math, because a lender needs the real number, not a comfortable one.

Timeline

We deliver on lender timelines, and we quote the turnaround before the engagement letter is signed so the closing calendar is never guessing at us. When a deal has a financing contingency expiring, tell us the date. We have built the practice to hit it.

How the process works

The engagement follows a fixed sequence. We confirm scope and fee with the lender and issue the engagement letter. We send a document request the same day: three years of tax returns, interim financials, the purchase agreement, and a short questionnaire on operations, customers, and the lease. We normalize the earnings, adding back owner compensation above market, one-time items, and personal expenses running through the P&L, and we document each adjustment so the reviewer can trace it. We apply the approaches that fit the business, weight them, and conclude. The lender receives a draft for factual review, then the final report for the loan file.

Two things keep SBA valuations on schedule, and both are in the parties’ control. First, complete financials at the start. The single largest source of delay in any valuation is the drip of documents arriving one at a time. Second, a realistic seller questionnaire. When the add-backs claimed in the broker package cannot be verified, the concluded value moves, and it is better for everyone to know that in week one rather than week four.

Common problems we flag early

A handful of issues sink more SBA deals than everything else combined: a contract price built on unverifiable add-backs, one customer above 40 percent of revenue, a remaining lease term shorter than the loan, and working capital the buyer did not plan to fund. When we see one of these in the file, the lender hears about it immediately, not in the final report. Deals survive problems that surface early. They rarely survive problems that surface at closing.

Where to start

If you are a lender with a deal in underwriting, contact us and we will scope the engagement the same day. If you are a buyer or seller and want to understand what the business is likely worth before the lender orders the appraisal, start with our no-cost indication of value at indication.oakstonevaluationgroup.com.