A business appraisal, performed by a 'qualified appraiser', is required for SBA loan packages that exceed $250,000.
Hypothetical scenarios that require a qualified appraiser:
An individual is looking to acquire a small company. As required by the SBA, the buyer's lender must obtain an independent business valuation report from a qualified appraiser.
A business owner is seeking an SBA loan to gain additional working capital for his company. The SBA requires his local lender to obtain a business valuation as part of the loan analysis.
Special considerations for SBA loan valuation purposes:
Per the SBA SOP 50 10 5(a), lenders may perform their own business appraisals if the requested loan amount is under $250,000. However, when the loan amount is higher or if there is a close relationship between buyer and seller, the lender must obtain an independent business valuation by a qualified business appraiser as described in the SBA SOP. Click here to view details on SBA Standard Operating Procedures.
It is important to note that these types of valuations are typically initiated by the SBA lender rather than by the owner of the business. This avoids even the appearance of a conflict of interest as well as satisfying the restrictions to which lenders must adhere.
Business valuations for purchase of a business are very time sensitive. As such, cooperation between the appraiser, the lender and the business owner is critical to completing the valuation on time. The appraiser should also have access to the company’s facilities for site visits and access to the company’s owners for interviews.
Documents required to complete an appraisal:
Profit and loss and balance sheet statements for the last three to five years
Interim profit and loss and balance sheet statements for the current year
Federal income tax returns for the last three to five years
