The Myth:Maintenance capital expenditures don’t affect value. The Reality:Ignoring CapEx inflates free cash flow and overstates value. Every business has recurring investment needs — whether it's equipment, vehicles, or tech infrastructure. Why It Matters:Failing to account for CapEx misleads buyers and lenders about long-term sustainability. Practical Tip:Always subtract normalized CapEx from cash flow.
SBA 7a Business Valuation Myths
35 Business Valuation Myths Every SBA Lender Should Know
In the world of SBA 7(a) lending, understanding business valuation is essential — and misunderstanding it can be costly. From misapplying earnings multiples to overestimating goodwill or ignoring normalization adjustments, even well-meaning lenders can fall for common myths that jeopardize compliance with SBA SOP 50 10 8 and increase the risk of guaranty repair or denial. This blog series unpacks 35 of the most common valuation myths in SBA lending, breaking down each one with clear, lender-focused insights. Whether you’re reviewing an independent appraisal or screening a deal pre-LOI, these posts will help you recognize red flags, ask better questions, and protect your portfolio.
📚 Valuation Myth: Book Value Sets a Minimum Value
The Myth:A business is always worth at least its book value. The Reality:If the business isn’t profitable, or if its assets are illiquid or obsolete, the true value may fall below book. Buyers pay for income potential — not just recorded assets. Why It Matters:Using book value as a floor can lead to overvaluation — … Continue reading 📚 Valuation Myth: Book Value Sets a Minimum Value
📚 Valuation Myth: A Business Appraisal = Equipment Appraisal
The Myth:A business appraisal is the same thing as an equipment or asset appraisal. The Reality:Business valuations analyze total enterprise (or equity) value — including goodwill, cash flow, risk, and intangibles — while asset appraisals focus on the resale value of physical equipment. Why It Matters:Confusing the two can result in incomplete collateral analysis or … Continue reading 📚 Valuation Myth: A Business Appraisal = Equipment Appraisal
📚 Valuation Myth: Projections Don’t Need Support
The Myth:Future projections are enough to justify value — no need to back them up. The Reality:Projections without clear support are just optimistic guesses. Buyers and SBA lenders need evidence — like written plans, assumptions, customer contracts, and operating history — to trust future performance claims. Why It Matters:Relying on unsupported projections can inflate value … Continue reading 📚 Valuation Myth: Projections Don’t Need Support
📚 Valuation Myth: All Valuations Are Created Equal
The Myth:As long as the report has a number, it's reliable. The Reality:Not all valuations are based on credible data, accepted methods, or professional standards. Some are biased, boilerplate, or created to hit a target. Why It Matters:Relying on a weak or non-compliant valuation can lead to poor decisions — or SBA loss of guarantee. … Continue reading 📚 Valuation Myth: All Valuations Are Created Equal
Highland Global Business Valuations 