Use this matrix to connect valuation red flags with SBA SOP requirements and underwriting risk categories.

Deadly Sin	SBA SOP 50 10 8 / Underwriting Concern	Why It Matters
1. Confusing Fair Market Value with Strategic Value	SBA requires FMV standard	Strategic value misleads stakeholders and may result in overvaluation unsupported by market participants.
2. Incorrect Adjustments to Financial Statements	Affects global debt service coverage, eligibility, and cash flow adequacy	Inflated add-backs misrepresent financial health and repayment capacity.
3. Unreasonable Forecasts	Projections must be reasonable and supportable	Aggressive projections undermine reliability of the valuation and lender’s repayment analysis.
4. Mismatching Discount Rate and Income Stream	Results in flawed indication of value and violates standard appraisal practices	Can materially misstate value and result in non-compliance with SOP.
5. Insufficient Financial Information	Incomplete financials violate SOP documentation requirements	Prevents proper underwriting and due diligence. SBA may require a repair.
6. Using Global Cash Flow Instead of Free Cash Flow	Cash flow must reflect business—not owner or household—performance	Leads to flawed DSCR analysis and potential loan servicing issues.
7. No Reasonability Analysis	Appraisals must contain supportable conclusions	Raises red flags with SBA reviewers; no cross-check or sanity check impairs credibility.

Lender Tip

Share this matrix with your credit team to foster stronger communication between lenders, appraisers, and underwriting personnel.