📢 Just because a company sold for 10x EBITDA doesn’t mean your deal should be valued that way. Market comps are helpful—but only when adjusted for: Size Industry Risk Terms Liquidity SBA lenders need fair market value—not headline multiples.
7a Business Valuation Field Notes
Welcome to 7(a) Business Valuation Field Notes — a running series of insights, strategies, and quick reads pulled directly from our content library. Designed for SBA lenders, brokers, and business buyers, these posts break down complex valuation topics into practical, bite-sized guidance you can actually use. Whether you’re navigating fair market value, tackling SOP compliance, or trying to make sense of goodwill and cash flow, this is your go-to resource for grounded valuation clarity — straight from the field.
SBA 7(a) Business Valuation Multiples Cheat Sheet
This cheat sheet provides estimated price-to-revenue (P/Revenue) and price-to-EBITDA (P/EBITDA) multiples for small businesses across various industries, based on heuristic and empirical data from transactional and valuation analyses and cross-referenced with market research. These ranges are tailored for SBA 7(a) loan valuations, focusing on businesses with revenues typically under $5M. This cheat sheet is designed … Continue reading SBA 7(a) Business Valuation Multiples Cheat Sheet
🏦 Why Global Cash Flow Can’t Justify a Higher Valuation
Global cash flow is great for underwriting—but it doesn’t belong in a valuation model. Valuation relies on free cash flow from the subject business—not combined with personal income, spouse wages, or real estate. Why? Because buyers only buy the business, not the owner’s other income sources. Takeaway for lenders: If you use global cash flow … Continue reading 🏦 Why Global Cash Flow Can’t Justify a Higher Valuation
🚩 Red Flag Story: Broker-Driven Valuation
📉 A deal came in at a $3.5M price tag based on a broker "valuation." Their logic? “Because similar businesses sell for 5x.” But: No normalized cash flow No working capital terms No review of recurring CapEx We valued it at $2.1M. The lender restructured the deal. Buyer still closed—safely. Brokers sell optimism. Lenders need … Continue reading 🚩 Red Flag Story: Broker-Driven Valuation
🧠 Business Valuation vs. Real Estate Appraisal
🏢 Real estate appraisals follow rules. Business valuations require judgment. That’s why: FMV (fair market value) for a building can be +/- 2% FMV for a business might swing 20–30% depending on assumptions Appraisers must justify every step. But subjectivity is built into valuation—because businesses are messy. SBA lenders need to understand both sides of … Continue reading 🧠 Business Valuation vs. Real Estate Appraisal
💸 Why the Same Business Can Have Two Different Values
Confused clients often ask: “Why did the valuation change? It’s the same company!” Here’s why: it’s not about the business—it’s about the deal structure. A stock purchase is riskier for the buyer than an asset purchase with leverage. That means a higher required return—and a lower equity valuation. Backed by Nobel-winning theory from Modigliani & … Continue reading 💸 Why the Same Business Can Have Two Different Values
🎁 Resource Drop: Addback Risk Review Tool
📘 We created an Addback Review Tool to help SBA lenders validate free cash flow adjustments. Includes: ✅ What counts as legitimate✅ Addback audit checklist✅ Review questions 📩 Click here to grab your copy.
📊 Case Study: “Adjusted” to Death
Seller showed $450K in cash flow after $160K in adjustments. Problem: $36K was “one-time” marketing (used every year) $28K in car leases for sales personnel $19K in non-owner bonuses “not needed post-sale” $27K of normal business insurance Final adjusted FCF: ~$340KValuation dropped. Loan size reduced. Buyer injected more equity. 📌 Always test the addbacks.
🧠 Sin Spotlight: Fantasy Free Cash Flow
🧯 Deadly Sin: Addback Abuse = Fake Cash Flow We’ve seen appraisals with: ❌ Business travel labeled as “discretionary”❌ All advertising added back❌ Working owner and spouse payroll erased with no replacement If the addbacks are inflated, the cash flow is fantasy—and so is the value. 📌 SBA valuations must reflect economic reality, not seller … Continue reading 🧠 Sin Spotlight: Fantasy Free Cash Flow
✅ Global Cash Flow ≠ Business Value
💬 Lenders use global cash flow to underwrite loans. But business valuation? That’s a different animal. Here’s why you can’t justify a higher price using global cash flow. 👉 Read our white paper on Global Cash Flow vs. Free Cash Flow
Highland Global Business Valuations 