🔍 A buyer was acquiring a business for $1.2M. Everything looked clean—until we noticed the working capital wasn’t included. No cash. No receivables. No payables.Zero net working capital in the deal. The value dropped once we adjusted for what the buyer would actually receive. Lesson: consider the assets transferred, not just the income stream.

💡 In SBA valuations, working capital can quietly make—or break—a deal. When calculating free cash flow and total value, we ask: ✔️ What working capital is actually being transferred?✔️ Will the buyer have enough to run the business Day 1?✔️ Is there a working capital deficit they’ll need to fund? Ignoring working capital? That’s like … Continue reading 🧠 The Role of Working Capital in Valuation

🔎 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.