Business Valuations

This report is designed specifically for SBA lenders in need of a Certified Business Valuation.

SBA SOP 50-10 7 COMPLIANT

Our certified appraisers use their unique business ownership and valuation experience to produce high quality reports in a timely and efficient manner. Our firm strives to provide excellent service through collaboration and open communication with our clients.

This report is designed specifically for SBA Lenders that are looking for a Certified Business Valuation for a business that requires 7(a) financing.

“If the amount being financed (including any 7(a), 504, seller, or other financing) minus the appraised value of real estate and/or equipment is greater than $250,000 or if there is a close relationship between the buyer and seller (for example, transactions between family members or business partners), the lender must obtain an independent business appraisal from a qualified source.” – SBA Standard Operating Procedure 50 10 7 p.117

Important note: the SBA considers an employee/employer [buyout] to be a close relationship.

WE USE ALL THREE VALUATION METHODS IN OUR SUMMARY VALUATION REPORTS

Income Approach

Consists of the Direct Capitalization of Earnings Method, used when earnings are projected to remain at a constant growth rate, or the Discounted Cash Flow Method, used when earnings are projected to fluctuate before stabilizing. The appraiser uses his judgment based on historical financials, among other attributes.

Market Approach

Consists of the Direct Data Market Method which derives multiples as a factor of sales and earnings streams from historical transactions of similar businesses. The valuation considers historical and current financial performance and assumes that the subject business will be sold on a debt-free basis.

Asset Approach

Also commonly known as the “cost approach” or the “replacement-cost approach.” Each asset of the business is valued separately (typically excludes intangibles) and the total of the liabilities is subtracted to derive the total value of the enterprise.

REPORT STRUCTURE

Introduction and Background

  •  Purpose and Use of the Report
  •  Primary Sources of Information

Economic Review and Outlook

  •  National and State Economy Overview
  •  Company-specific demographic analysis

Industry Review and Outlook

  •  Risks, Drivers, and Projected Growth
  •  Cost structure

Financial Review, Financial Ratios and Projections

  •  In-depth historical and current financial statement analysis
  •  Ratio comparison and implications on value

Valuation Methods – Market, Income, and Asset based approaches

  •  Balance Sheet analysis
  •  Comparable market transactions
  •  Application of premiums, discounts, and risk rates
  •  Value Conclusion

Appendix

  •  Qualifications
  •  Company Profile

SBA STANDARD OPERATING PROCEDURES

All Reports Must:

  1. Be requested and engaged by the lender
  2. Be prepared for the lender
  3. Identify whether the transaction is an asset or stock purchase
  4. Explicitly state what is included in the sale (including any assumed debt)
  5. Include a conclusion of value
  6. Include qualifications of the individual performing the valuation
  7. Include a signature with certification page

Other Requirements:

  1. The lender may not use an appraisal which is prepared for the applicant or seller
  2. The cost of the appraisal may be passed on to the Small Business Applicant

Further information regarding SBA business appraisal requirements can be found on pg.116-118: SBA SOP 50 10 7

Our in-house valuation professionals are engaged to assist with wealth preservation, tax reporting, and matters of dispute. The specialists at Reliant Business Valuation provide independent opinions of value of businesses, fractional interests (aka “discount studies”), fund investments, intellectual property, real estate, and equipment as well as forensic accounting and expert witness services in matters of dispute. Our staff meet the IRS standards of a “Qualified Appraiser.”

Critical Deadline for Gift Tax Exemptions
At midnight December 31, 2025, the federal lifetime gift tax exemption will plummet from over $13 million to over $7 million dollars for 2026.
If you haven’t taken advantage of the current opportunity to gift interests in your business, real estate, private equity, BDC or other funds, why are you waiting? Valuations are lower in 2023 and 2024 due to multiple market forces.
Low values provide an opportunity to gift a higher percentage of one’s investments tax free, but that opportunity is lost when valuations are higher and the gift tax threshold is lower.
Click here to read Marshall & Stevens’ exclusive article Wealth Transfer before the Cliff to learn more about valuation and gifting of equity and debt interests in businesses, real estate, and funds, include carried interests.

Estate and Gift Tax Reporting
The IRS expects Estate and Gift Tax valuations to be performed by professionals experienced in valuing similar enterprises and assets and that each analysis comply with IRC 59-60, including consideration of all three generally accepted approaches to value, as they may apply: Income Approach, Market Approach and Cost Approach. Our staff meet the IRS standards of a “Qualified Appraiser.”
For fractional interest studies (aka “Discount Studies”), our analyses consider multiple valuation methods to determine the difference in value between a control and a minority interest, as well discounts for lack of marketability, if appropriate. Such methods include, as applicable:

  1. Benchmarking (i.e. Mandelbaum analysis)
  2. Restricted stock analyses

We assist equity holders with the valuation of domestic and international investments, including:

  • Interests in closely-held businesses and in thinly-traded public companies.
  • Equity and debt instruments in simple and complex capital structures.
  • Carried interests and investments in business development companies (“BDC”), private equity funds, hedge funds, and real estate funds.
  • Interests in trusts, LLCs, LP’s, FLPs, S-corps, etc.
  • Marketable securities.
  • Real estate, intellectual property, and equipment.
  • Interests in real estate holding companies, combining the skills of our real estate appraisers and financial valuation analysts.

Conclusion of Value

As per SOP 50 10 7 p.117: If the amount being financed (including any 7(a), 504, seller, or other financing) minus the appraised value of real estate and/or equipment being financed is greater than $250,000 or if there is a close relationship between the buyer and seller (for example, transactions between existing owners or family members), lender must obtain an independent business valuation from a qualified source.

  • Compliant with SBA SOP requirements (latest version) as an “independent business valuation from a qualified source”
  • Compiled by a CBA or CVA (“qualified source” as per the SOP)
  • Uniform Standards of Professional Appraisal Practice (USPAP) Compliant
  • Typically 90-100 pages with all add-back proof appended
  • Income, Market and Asset Approach analyzed (as applicable)

What is your typical turnaround time?

7-10 Business Days

Our typical turnaround time is 7-10 business days from engagement. This can vary based on type of deal and will be clearly conveyed prior to engagement.

Do you offer rush options?

YES!

We offer 5 and 7 day rush options for an additional cost. Availability is based on our queue at the time of request.

How much do you charge to update a previously completed report?

Typically, to update a previously completed report, the fee is 50% of the original cost.  However, in circumstances where the update lacks complexity, the cost will be calculated per hour of labor at $250/hour.  Please call 908-888-6030 to discuss your specific update request.

Can you assign a report to a different client?

Our reports comply with the Uniform Standards of Professional Appraisal Practice (USPAP), which do not allow us to “assign” a report to another lender. Additionally, the SBA SOP states “the business valuation must be requested by and prepared for the Lender”. For these reasons, we would need to execute a new engagement letter between Reliant and the new client. For additional information and pricing please call 908-888-6030 to discuss your specific assignment request.

What documents do you require in order to engage a report?

Please visit our valuation order form page and scroll down to Step 2 – Document Checklist to view a list of documents required to engage a report.

Do you provide sanity test or rules of thumb?

YES!

We are able to conduct sanity tests on a case-by-case basis. Please contact us for more information.

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