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

Use this tool to assess whether free cash flow adjustments (addbacks) are legitimate, recurring, and SBA-compliant. What Is an Addback? An addback is an adjustment to earnings that removes non-recurring, discretionary, or owner-specific expenses to arrive at normalized free cash flow. Legitimate Addbacks Include Excess officer compensation Personal vehicle or travel expenses One-time legal or … Continue reading Addback Risk Review Tool

Use this checklist to assess businesses in this industry for SBA 7(a) lending and underwriting. 📅 Revenue Seasonality & Enrollment Patterns Is revenue consistent year-round or tied to school calendars? Are peak periods (e.g., SAT/ACT seasons, back-to-school) clearly disclosed? Is revenue smoothed/normalized across seasonal highs and lows? Are summer/winter slumps accounted for in projections? 🧑‍🏫 … Continue reading Test Prep & Tutoring Center Checklist

Use this checklist to assess businesses in this industry for SBA 7(a) lending and underwriting. Owner Dependency + Branding Risk Is the owner responsible for product curation, displays, or supplier relationships? Would customers return without the owner present? Is goodwill tied to the owner's persona or the store’s brand? Has a market salary been substituted … Continue reading Specialty Retail Store Checklist