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

📄 Inventory and Working Capital Review

• Is inventory turnover within industry norms?
• Are slow-moving or obsolete SKUs identified and excluded?
• Is inventory valued at cost, market, or overstated?
• Has working capital been normalized in cash flow or included in value?

👨‍💼 Owner Role and Labor Normalization

• Is the owner responsible for sales, sourcing, and operations?
• Has their role been split for market-based compensation?
• Are there salaried team members, or is the business owner-run?

🚩 Customer and Revenue Risk

• Do 1–2 customers account for >30% of revenue?
• Are contracts long-term, recurring, or project-based?
• Is revenue tied to a few high-spend clients or diverse accounts?
• Are past revenue spikes explained and normalized?

📊 Gross Margin and Expense Trends

• Are gross margins stable over time?
• Is there a decline in margin due to price pressure or competition?
• Are SG&A expenses consistent with distributor benchmarks?

📌 SBA SOP Tip

Valuations must reflect normalized cash flow, inventory cycle risk, and owner replacement wages—not top-line revenue or stale inventory assumptions.