Effective March 1, 2009, all SBA lenders are required by the Small Business Administration to follow its revised Standard Operating Procedures (SOP). Key features of the SOP 50 10 5(A) includes the following:
Determining the value of a business (not including real estate which is separately valued through an appraisal) is the key component to the analysis of any loan
application for a change of ownership. An accurate business valuation is required
because the change in ownership will result in new debt unrelated to business
operations and create “blue sky,” or goodwill. A business valuation assists the lender
and the buyer in making the determination that the seller’s asking price is supported by historic operations.
For loans of $250,000 or less, the lender may do its own valuation of the business being sold.
For loans greater than $250,000 or if there is a close relationship between the buyer and seller, the lender must obtain an independent business valuation from a qualified source. A “qualified source” is an individual who regularly receives compensation for business valuations and is accredited by a recognized organization. Some recognized organizations and the accreditations they provide
include:
Accredited Senior Appraiser (ASA)
accredited through the American Society of Appraisers;
Certified Business Appraiser (CBA)
accredited through the Institute of Business Appraisers;
Accredited in Business Valuation (ABV)
accredited through the American Institute of Certified Public Accountants; and
Certified Valuation Analyst (CVA)
accredited through the National Association of Certified Valuation Analysts.
To view the entire SOP 50 10 5(A), please click here
Allied Business Group has conducted hundreds of accredited business appraisals for companies of all sizes and industries. We can provide SBA lenders with certified business valuation reports that meet the standards of USPAP and SBA regulations. For more information, please contact us.
