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

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

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

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

Regression analysis in business valuation, particularly the Direct Market Data Method (DMDM), relies on R-squared (R²) values. This article examines these statistical concepts, their interpretation and their implications for SBA 7(a) valuations. The Role of R-Squared in Regression Analysis R-squared (R²) measures the proportion of variance in the dependent variable (e.g., sale price) explained by … Continue reading Interpreting R-Squared in Business Valuation: A Cautious Approach to the Direct Market Data Method

Transaction databases are integral to the market approach in business valuation, providing empirical data on private company sales. This article examines three leading databases—BIZCOMPS, ValuSource Market Comps, and DealStats—highlighting their advantages, limitations, and implications for valuation accuracy. The report integrates commentary and research from valuation professionals and third-party sources to offer a well-rounded perspective. 1. … Continue reading BIZCOMPS, ValuSource Market Comps, and DealStats in Business Valuation

In states with liquor license quotas, the market value of a liquor license can significantly exceed the operating cash flow of the business holding it, creating a valuation challenge for SBA 7(a) loans. These loans prioritize the business as a going concern, focusing on cash flow rather than intangible asset premiums, often leading to a … Continue reading Liquor License Quotas and SBA 7(a) Lending — Navigating the Disconnect Between Market Value and Going Concern Appraisals