📉 A strategic buyer offered $2.1M for a business. FMV? $1.15M. They saw value in: Route overlap Staff consolidation IP synergy But the SBA lender needed a fair market value opinion. Not a synergy-based fantasy. We ran the numbers. Deal got restructured. Buyer still closed—but brought more equity. ⚠️ Remember: Strategic value ≠ FMVDon’t underwrite … Continue reading 🚩 Red Flag Story: Strategic Buyer Overbid

They’re both discount rates—but they apply to very different cash flows. WACC is for free cash flow to the firm. Cost of Equity is for free cash flow to equity. Using the wrong one? You’re mismatching risk and return—and that throws off the valuation. Takeaway: Always align the rate with the income stream. It’s a … Continue reading ⚖️ WACC and Cost of Equity Are Not Interchangeable

In SBA 7(a) deals, it’s not uncommon for the valuation to come in below the purchase price. But why does this happen — and what does it mean for lenders? We break down the Top 10 Reasons Fair Market Value Doesn’t Match the Deal Price, from understated rent and low owner salaries to unrealistic forecasts … Continue reading 🚨 Why the Valuation Falls Short — and What Lenders Need to Know

⚖️ Can the discount for lack of marketability (DLOM) apply to a 100% controlling interest? Yes—when the business isn’t easily sellable or lacks liquidity options. ✅ Low marketability = real economic drag✅ Controlling stake ≠ liquid investment✅ DLOM should reflect the actual time and cost to exit the business We recently published a white paper … Continue reading 🧠 DLOM for Controlling Interests

💬 If tax status alone made a company more valuable, every C-corp would flip the switch. Here's why that's a myth — and how to value pass-throughs with accuracy. 👉 Download: 'Entity Value Shouldn’t Depend on Tax Election'

When a buyer acquires both the business and the real estate, rent must be normalized. Why? Because rent represents a real economic cost—even if the seller wasn’t charging themselves. Takeaway: Use market rent, not historical self-rent. It impacts earnings, valuation, and ultimately debt service coverage. Check out our article and video on this topic!

🧾 Business owners often run perks through the company—but not all of them belong in a valuation adjustment. Let’s break it down:✅ Valid adjustments: true personal expenses (e.g., country club dues, family vacations)⚠️ Invalid: things the new owner will have to spend again (like fuel, travel for conferences, or sales bonuses) Rule of thumb? If … Continue reading 🧠 Adjusting for Owner Perks

Discount for Lack of Marketability (DLOM) isn’t just for minority interests. Even if you own the whole business, you can’t cash out tomorrow. That illiquidity matters—and it’s why DLOMs are justified even for controlling stakes. Takeaway for SBA lenders: The DLOM reflects real economic friction. It’s not about control—it’s about marketability. Check out our article … Continue reading 🧊 Even a 100% Owner Can’t Sell Overnight

🚜 A manufacturer had solid cash flow—but we discovered most equipment was outdated, barely functioning, and not included in CapEx forecasts. Without reinvestment, operations would stall. With proper CapEx? Cash flow dropped by $110K/year. The fix:✅ Calculated Maintenance CapEx and Normalized Free Cash Flow✅ Lender adjusted loan terms Always ask: Will this business stay functional … Continue reading 🚩 Red Flag Story: Equipment Obsolescence

Every valuation is a risk-adjusted exercise. The greater the risk, the higher the return an investor will require—and the lower the value today. This principle is baked into every SBA 7(a) valuation through the discount or cap rate. Takeaway: Risk is the price of opportunity. It should never be ignored or “smoothed out” in small … Continue reading 📉 Low Risk? Low Return. High Risk? Better Be Worth It.