🔎 One business had 74% of revenue from a single client. Everything else looked perfect—but this concentration was a massive risk. The client could: Leave Reprice Delay payment Sell to a competitor We applied a risk premium + valuation discount. Lender added contingencies. Deal still closed—with better protection. Buyers chase opportunity. Lenders must calculate risk.

🛠️ A business showed stable free cash flow—until we noticed recurring CapEx was buried in "repairs and maintenance." Turns out: $22K/year went to new equipment Another $14K for upgrades they made annually But none of it was treated as CapEx Once we corrected for true capital needs, cash flow dropped—and so did the value. Free … Continue reading 🚩 Red Flag Story: Recurring CapEx Hidden as Repairs

💲 Quick reminder: A business’s value isn’t the same as what it can support in loan terms. ⚠️ We’ve seen deals where: FMV = $1.6M But loan ask = $2.1M Why? Personal goodwill, buyer synergy, optimism Appraisers calculate value. Underwriters assess risk. Those aren’t always aligned. 📌 The loan amount must fit within what the … Continue reading 🧠 Valuation vs. Loan Amount

📘 We created a Strategic Creep Review Tool to help lenders identify when a valuation drifts from FMV. It includes: ✅ Common language that signals strategic assumptions✅ Questions to ask your appraiser✅ SBA compliance red flags 📩 Click here to grab your copy.

🛠️ A buyer wanted to roll up a local competitor.The broker used a 4x multiple because of projected cost savings post-close. But those savings: ❌ Wouldn’t apply to anyone else❌ Didn’t exist on paper❌ Violated FMV standards We valued it using historical cash flow for the SBA 7a loan. Deal got restructured. Everyone won—but the … Continue reading 📊 Case Study: The “Perfect Fit” Problem

🧯 Deadly Sin: Valuing for a Specific Buyer (a.k.a. Strategic Drift) When a valuation includes: 💼 Synergy from the buyer's operations📈 Growth from the buyer's network🚪 Savings from shared space... …it’s not fair market value. It’s strategic value—and it violates SBA requirements. 📌 If the value only works for one buyer, it’s not supportable in … Continue reading 🧠 Sin Spotlight: Valuation Built for That Buyer

Not all valuations are created equal.There’s a critical difference between fair market value and strategic value—especially in SBA 7(a) lending. ✅ Fair Market Value assumes a hypothetical buyer with no special motivations.🤝 Strategic Value reflects what a specific buyer might be willing to pay for their own reasons (synergies, territory, IP, etc.). 💡 If you’re … Continue reading 🧠 Fair Market Value vs. Strategic Value

📘 Our Customer Concentration Discount Guide gives lenders the tools to adjust for risk properly. Includes: ✅ Industry-adjusted risk levels✅ Sample discount scenarios✅ How to discuss with borrowers 📩 Click here to grab your copy.

We reviewed a $1.7M business valuation of a manufacturing firm based on smooth cash flow. But then we asked: Who are the customers? How much of revenue comes from the top one? Answer: 72% 😳 We applied a risk discount. Value dropped ~30%. Buyer and lender restructured. Deal closed—with protection. 📌 If one customer leaves … Continue reading 📊 Case Study: 1 Customer = 72% of Revenue

🧯 Deadly Sin: Ignoring Customer Concentration Risk If one client makes up 30%+ of revenue, your cash flow has a single point of failure. Yet appraisals often: ❌ Ignore this risk❌ Apply normal multiples❌ Assume “it’ll be fine” 📌 Appraisers and SBA lenders must adjust value—or structure around it—when concentration threatens stability.