In SBA 7(a) business acquisitions, a common hurdle arises: the fair market value (FMV) in the business valuation report is lower than the agreed-upon purchase price. FMV represents what a hypothetical, willing buyer would pay for a business based on its current, verified financial performance. This gap can delay loan approvals, frustrate borrowers, and complicate … Continue reading Why Fair Market Value Often Falls Short of the Purchase Price in SBA 7(a) Deals: 10 Reasons Every Lender Should Know
goodwill valuation
🧠 DLOM for Controlling Interests
⚖️ Can the discount for lack of marketability (DLOM) apply to a 100% controlling interest? Yes—when the business isn’t easily sellable or lacks liquidity options. ✅ Low marketability = real economic drag✅ Controlling stake ≠ liquid investment✅ DLOM should reflect the actual time and cost to exit the business We recently published a white paper … Continue reading 🧠 DLOM for Controlling Interests
📚 Valuation Myth: Asset Sales Don’t Require Valuations
The Myth:When selling just the assets, you don’t need a full business valuation. The Reality:Even asset sales often include goodwill/intangible assets — all of which require formal valuation analysis, especially for SBA loans and tax compliance. Why It Matters:Ignoring non-tangible value can trigger tax issues, deal disputes, and underwriting gaps. Practical Tip:Evaluate total enterprise value … Continue reading 📚 Valuation Myth: Asset Sales Don’t Require Valuations
✅ No, S-Corps Aren’t Worth More Just Because They’re S-Corps
💬 If tax status alone made a company more valuable, every C-corp would flip the switch. Here's why that's a myth — and how to value pass-throughs with accuracy. 👉 Download: 'Entity Value Shouldn’t Depend on Tax Election'
🏠 Owning the Building Doesn’t Make Rent Free
When a buyer acquires both the business and the real estate, rent must be normalized. Why? Because rent represents a real economic cost—even if the seller wasn’t charging themselves. Takeaway: Use market rent, not historical self-rent. It impacts earnings, valuation, and ultimately debt service coverage. Check out our article and video on this topic!
🧠 Adjusting for Owner Perks
🧾 Business owners often run perks through the company—but not all of them belong in a valuation adjustment. Let’s break it down:✅ Valid adjustments: true personal expenses (e.g., country club dues, family vacations)⚠️ Invalid: things the new owner will have to spend again (like fuel, travel for conferences, or sales bonuses) Rule of thumb? If … Continue reading 🧠 Adjusting for Owner Perks
📚 Valuation Myth: 2019 Financials Are Still Relevant Forever
The Myth:Pre-COVID numbers are the true benchmark for valuation. The Reality:Markets have shifted permanently post-2020. Buyers, lenders, and valuators prioritize current, sustainable performance over historical pre-pandemic results. Why It Matters:Using outdated financials risks overvaluing businesses that haven’t recovered or adapted. Practical Tip:Focus your valuation on proven recovery trends — not just historical highs.
🧊 Even a 100% Owner Can’t Sell Overnight
Discount for Lack of Marketability (DLOM) isn’t just for minority interests. Even if you own the whole business, you can’t cash out tomorrow. That illiquidity matters—and it’s why DLOMs are justified even for controlling stakes. Takeaway for SBA lenders: The DLOM reflects real economic friction. It’s not about control—it’s about marketability. Check out our article … Continue reading 🧊 Even a 100% Owner Can’t Sell Overnight
🚩 Red Flag Story: Equipment Obsolescence
🚜 A manufacturer had solid cash flow—but we discovered most equipment was outdated, barely functioning, and not included in CapEx forecasts. Without reinvestment, operations would stall. With proper CapEx? Cash flow dropped by $110K/year. The fix:✅ Calculated Maintenance CapEx and Normalized Free Cash Flow✅ Lender adjusted loan terms Always ask: Will this business stay functional … Continue reading 🚩 Red Flag Story: Equipment Obsolescence
📚 Valuation Myth: CapEx Doesn’t Matter in Valuation
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.
Highland Global Business Valuations 