Goodwill, often misunderstood in SBA 7(a) loan underwriting, represents the value of a business exceeding its identifiable net tangible assets, driven by future economic benefits. This white paper explains goodwill calculation, scenarios yielding zero goodwill, and SBA 7(a) regulations, emphasizing the capitalization of earnings method for robust valuations. Lenders must ensure goodwill reflects fair market … Continue reading Goodwill in Business Valuation: Understanding Its Role in SBA 7(a) Business Acquisition Loans

In SBA 7(a) lending, evaluating the risk and return of closely held businesses is critical to ensuring sound loan decisions. Unlike publicly traded investments, closely held businesses present unique risks—illiquidity, owner dependence, and lack of diversification—that demand a tailored approach to valuation and underwriting. This white paper explores how to measure return using net cash … Continue reading Understanding Risk and Return in Closely Held Businesses: A Guide for SBA Lenders

In business valuations for SBA 7(a) lending, the premise of value plays a pivotal role in determining how a company is assessed. The two primary premises of value are the going concern and liquidation premises. This white paper explores the conceptual differences between these premises, their implications on valuation methodology, and their application in SBA … Continue reading Going Concern vs. Liquidation Premise of Value in SBA 7(a) Business Valuations

Relocating an established restaurant in an urban U.S. market is a complex endeavor that can significantly affect the business’s valuation. Whether the restaurant is an independent eatery or part of a franchise chain, moving to a new location introduces operational disruptions and financial uncertainties that valuation professionals must carefully consider. This white paper analyzes how … Continue reading The Impact of Restaurant Relocation on Business Valuation

Marketability—the ability to convert an asset to cash quickly with minimal value loss—is a critical factor in business valuation. Privately held companies, lacking public market access, often require a Discount for Lack of Marketability (DLOM). While commonly associated with minority interests, DLOM is also relevant for controlling interests, though its application is more nuanced. This … Continue reading Discount for Lack of Marketability in the Valuation of Controlling Interests in Privately Held Companies

Leasehold improvements—such as customized build-outs or interior upgrades made by a tenant to a leased space—are a common feature of business operations, especially in retail, healthcare, and food service sectors. But when it comes to valuing a business for acquisition or SBA lending, how should these improvements be treated? This white paper explores the nature … Continue reading Leasehold Improvements in Business Valuation: Sunk Costs or Transferable Value?

SBA 7(a) loan underwriting relies on global cash flow (GCF) to assess the collective repayment ability of borrowers and guarantors, while business valuations for SBA 7(a) acquisition loans focus on free cash flow (FCF) to determine a business’s stand-alone value. This white paper clarifies the distinctions, purposes, and reasons GCF cannot justify higher valuations, emphasizing … Continue reading Understanding Global Cash Flow in SBA 7(a) Loan Underwriting vs. Free Cash Flow in Business Valuations