SBA 7(a) loan underwriting relies on global cash flow (GCF) to assess the collective repayment ability of borrowers and guarantors, while business valuations for SBA 7(a) acquisition loans focus on free cash flow (FCF) to determine a business’s stand-alone value. This white paper clarifies the distinctions, purposes, and reasons GCF cannot justify higher valuations, emphasizing … Continue reading Understanding Global Cash Flow in SBA 7(a) Loan Underwriting vs. Free Cash Flow in Business Valuations
Valuation Insights & Articles
Welcome to Valuation Insights & Articles, where Highland Global shares thought leadership, expert guidance, and commentary on the ever-evolving world of business valuation. Here, you’ll find practical insights tailored for SBA lenders, business owners, attorneys, and financial professionals. Topics include SBA 7(a) valuation standards, goodwill analysis, tax-related valuation, M&A strategy, litigation support, and valuation methodology best practices. Stay informed with clear, actionable content rooted in real-world experience and regulatory knowledge.
📊 Case Study: The “Perfect Fit” Problem
🛠️ 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
🧠 Sin Spotlight: Valuation Built for That Buyer
🧯 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
Valuation Strategies for M&A Success
In mergers and acquisitions (M&A), valuation is a strategic linchpin, not merely a mathematical exercise. A well-executed valuation aligns buyer and seller expectations, secures financing, and drives deal closure. This white paper outlines advanced strategies to optimize M&A outcomes, integrating robust modeling, scenario planning, and due diligence preparation, supported by current industry insights and best … Continue reading Valuation Strategies for M&A Success
🧠 Fair Market Value vs. Strategic Value
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
🎁 Resource Drop: Customer Concentration Discount Guide
📘 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.
📊 Case Study: 1 Customer = 72% of Revenue
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
🧠 Sin Spotlight: The 1-Customer Problem
🧯 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.
The Impact of Key Person Loss on Business Valuation in the SBA Loan Context
The sudden death or departure of a key individual—often the founder or owner—can devastate a small business’s viability and value. When operations, customer relationships, or specialized knowledge hinge on a single person, the loss can shift a business from a going concern to distress. This white paper examines the financial, operational, and valuation consequences of … Continue reading The Impact of Key Person Loss on Business Valuation in the SBA Loan Context
Why the Harmonic Mean is Best for Analyzing Financial Ratios
When analyzing business valuation multiples—such as price-to-revenue (P/R) or price-to-EBITDA—choosing the right type of average is essential to avoid misleading conclusions. While many professionals default to the arithmetic mean (a simple average), a more accurate and meaningful metric for ratios is the harmonic mean. This article explains why, using real-world examples and straightforward explanations for … Continue reading Why the Harmonic Mean is Best for Analyzing Financial Ratios
Highland Global Business Valuations 