Use this guide to evaluate whether working capital (WC) has been properly addressed in a business valuation and underwriting for SBA lending purposes. Step 1: Identify WC Components Accounts Receivable (AR) Inventory Accounts Payable (AP) Accrued expenses Step 2: Evaluate Treatment in Valuation Is WC included in the purchase price or treated as a separate … Continue reading Working Capital Guide
Robert M Clinger III
Mapping The 7 Deadly Sins of Valuation to SBA SOP & Underwriting Concerns
Use this matrix to connect valuation red flags with SBA SOP requirements and underwriting risk categories. Deadly SinSBA SOP 50 10 8 / Underwriting ConcernWhy It Matters1. Confusing Fair Market Value with Strategic ValueSBA requires FMV standardStrategic value misleads stakeholders and may result in overvaluation unsupported by market participants.2. Incorrect Adjustments to Financial StatementsAffects global … Continue reading Mapping The 7 Deadly Sins of Valuation to SBA SOP & Underwriting Concerns
Strategic Creep Review Tool
Use this tool to identify when a purchase price or business valuation has drifted from Fair Market Value (FMV) into buyer-specific strategic assumptions. FMV vs. Strategic Value Recap FMV = Value to a hypothetical buyer in an open market Strategic Value = Value to a specific buyer based on synergies or integration Red Flag Phrases … Continue reading Strategic Creep Review Tool
Rules of Thumb Red Flag Guide
Use this guide to identify risky valuation shortcuts based on rules of thumb instead of proper analysis. What Are Rules of Thumb? Simple heuristics like '3x earnings' or '1x revenue' used to estimate value without detailed analysis. Often based on anecdotal deals or broker norms—not on real market data or normalized financials. Why They’re Dangerous … Continue reading Rules of Thumb Red Flag Guide
Rent Normalization Memo Template
Use this memo format to document market rent adjustments in underwriting and business valuations involving related-party real estate. Purpose To adjust reported rent expenses to reflect fair market lease rates, ensuring accurate valuation of the business under SBA standards. Deal Summary Business Name: ___________________________Property Address: __________________________Valuation Date: ____________________________ Current Rent Situation Monthly Rent Paid: $_________ … Continue reading Rent Normalization Memo Template
Top 10 Red Flags in SBA Underwriting
Use this guide to spot issues that may compromise SBA loan eligibility or underwriting integrity. Strategic Value Posed as Fair Market Value Purchase price based on buyer-specific synergies or strategic premiums rather than independent third-party FMV standard. Excessive or Unsupported Add-Backs Owner compensation, non-recurring expenses, or personal items inflated or unverified. Lack of Source Documentation … Continue reading Top 10 Red Flags in SBA Underwriting
Projections Risk Guide
Use this guide to evaluate the reliability and appropriateness of financial projections used in underwriting and business valuations for SBA lending. When Are Projections Acceptable? When used to support buyer expectations when the business has limited operating history or extenuating circumstances When based on realistic, documented assumptions and corresponding business plan When tied to actual … Continue reading Projections Risk Guide
Personal vs. Enterprise Goodwill Guide
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
Owner Compensation Normalization 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
Job vs. Business 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
Highland Global Business Valuations 