Use this guide to assess whether goodwill in underwriting and the valuation is truly transferable to a buyer—or tied to the seller personally. Definitions Personal Goodwill: Tied to the seller’s relationships, skills, reputation, or presence. Not easily transferable. Enterprise Goodwill: Associated with systems, staff, location, brand, or contracts. Transferable to a new owner. Why It … Continue reading Personal vs. Enterprise Goodwill Guide

A practical guide for SBA lenders to evaluate and normalize owner compensation in underwriting and valuations. Why Normalize Owner Compensation? Owners often underpay themselves for tax reasons or overpay to reduce net income. SBA valuations must reflect the cost a buyer would incur to replace the owner’s role at market wages. Improper salary adjustments can … Continue reading Owner Compensation Normalization Guide

Use this guide to determine whether a business is a transferable enterprise—or just a job with risk. Key Evaluation Questions Does the business generate cash flow *without* the owner working full-time? Are there employees, systems, and processes in place? Would a buyer need to work 60+ hours/week to maintain current revenue? Is there documented goodwill, … Continue reading Job vs. Business Guide

Use this checklist to evaluate the key risk factors and underwriting considerations in SBA franchise deals. Step 1: Verify Franchise Agreement Terms Is there a valid and assignable franchise agreement? Are there transfer fees? Are seller's royalties and advertising fees consistent with current franchise disclosure document? What are buyer approval and training conditions? Step 2: … Continue reading Franchise Underwriting Guide

In the context of SBA 7(a) lending, the business valuation standard used in underwriting is more than a technicality—it affects the defensibility of the loan, regulatory compliance, and ultimately portfolio performance. This guide explains the critical distinction between Fair Market Value (FMV) and Strategic Value, and why SBA lenders must ensure that valuations adhere to … Continue reading Fair Market Value vs. Strategic Value: A Practical Guide for SBA 7(a) Lenders

Use this guide to evaluate whether earnings multiples in a valuation report are applied correctly for SBA lending purposes. ✅ Checklist: Applying Multiples Correctly Was the cash flow or earnings calculation adjusted for reasonable officer compensation, market rent, and non-recurring items? Is the multiple supported by **market comps** from comparable private transactions, not broker hearsay … Continue reading Earnings Multiples Application Guide

Use this guide to assess the underwriting impact of customer concentration in SBA business acquisition deals. Why It Matters High customer concentration = higher revenue risk if a key client leaves. Reduces business transferability and stable earnings. May require valuation discounts or loan structuring changes. Review Questions Does one customer account for >25% of revenue? … Continue reading Customer Concentration Discount Guide

In business valuations—especially those conducted for SBA 7(a) loan purposes or during transactions—confusion often arises when changes in capital structure affect the valuation results. This confusion intensifies when a deal changes from an asset purchase to a stock purchase. Bankers and clients alike may ask, “Why does the value change if the business hasn’t changed?”To … Continue reading Understanding Capital Structure’s Impact on Business Valuation: A Guide for Bankers

Use this worksheet to evaluate whether capital expenditures (CapEx) have been properly accounted for in free cash flow estimates. Step 1: Identify CapEx Drivers Is the business equipment-heavy? Are assets aging or near replacement? Are there deferred upgrades or repairs? Is CapEx needed to maintain revenue (not just growth)? Step 2: Normalize CapEx Review historical … Continue reading CapEx Adjustment Worksheet

A quick guide for SBA lenders to distinguish between accounting-based book value and economic fair market value in business valuations. Definitions Book Value: The net value of fixed assets shown on the balance sheet (Assets – Accumulated Depreciation), based on accounting rules. Fair Market Value (FMV): The estimated amount, expressed in terms of money, that … Continue reading Book Value vs. Fair Market Value (FMV) Cheat Sheet