Use this checklist to assess businesses in this industry for SBA 7(a) lending and underwriting.

🧑‍🔧 Owner Dependency & Technical Skill Risk

• Is the owner the lead machinist, programmer, or estimator?
• Has a market wage been applied for the owner’s technical role?
• Is there trained staff or documentation to transfer technical knowledge?
• Are SOPs, G-code libraries, or CAD/CAM programs documented and transferrable?

📃 Revenue Profile & Client Concentration

• Is revenue tied to long-term contracts or one-off jobs?
• What percent of revenue comes from the top 1–3 customers?
• Are job backlog, quoting pipeline, and rework rates documented?
• Is there risk of revenue decline if a key buyer or industry exits?

🛠️ Equipment, CapEx & Depreciation

• Is equipment owned, leased, or vendor-financed?
• Is equipment age disclosed and FMV estimated for key CNC, EDM, or milling assets?
• Are CapEx reserves or recent purchases factored into free cash flow?
• Are depreciation expenses realistic, or masking CapEx shortfalls?

📊 Addbacks & Adjustments

• Are addbacks tied to owner perks, family payroll, or one-time tooling jobs?
• Are asset sales or gains on disposition excluded from EBITDA normalization?
• Is inventory (steel, metals, tooling) reconciled to job volume and rework?
• Are pass-through material costs adjusted or overstated?

🚩 Red Flags

• Owner performs 90%+ of quoting, setup, or programming
• No CapEx reserve and machinery >10 years old
• Over 50% of revenue tied to a single client or industry
• Addbacks include vague asset offsets or inflated scrap recovery

📌 SBA SOP Tip

Valuations for machine shops and tool & die operations must normalize owner labor, should reflect FMV of machinery, and adjust for CapEx. Enterprise value should not be inflated by aging assets, concentrated customers, or unverified backlog.