How to order an SBA Business Valuation

How to order an SBA Business Valuation

How to Order an Small Business Administration (SBA) Business Valuation for Your SBA Loan

When buying a business and financing with SBA, your bank’s SBA business valuation is very important. 

According to the SBA SOP (Small Business Administration Statement of Policy) your bank will be required to obtain a third party business valuation, if you have more than $250,000 of goodwill OR if your business acquisition transaction has related parties.

Related parties can be family members or boss / s;ubordinate relationships.  If the third party valuator does not find the proper value, your loan amount may be reduced or the loan may be rejected.

Whether you are a banker, a borrower, or a seller below is a summary of the ordering process for SBA loans.  Finally, should you have any questions on the process you are always welcome to contact us at Harvest Business Advisors (info@harvestbusiness.com).

Have three years of tax returns for the business. Have current and prior year, (i.e. March 2019 and March 2018) year to date data.  This allows the reviewer to see if the business is doing better or worse from last year taking seasonality into account.

If the Company has reviewed or audited financials provide them also.  In certain circumstances, you may need internal financials for all years, but that will vary case by case.

Have other important documents available such as

  • real estate lease
  • contract of sale or the letter of intent
  • loan commitment
  • the accounts receivable aging
  • the accounts payable aging
  • owner and manager salary and benefit information.  (Owner benefits including health insurance, auto, travel, entertainment, and unusual personal purchases.)
  • payments and benefits to other family members

Most valuators will also have a questionnaire for management or interview management.   If there are many personal benefits, those will have to be supported with additional documentation.  In some cases additional documents may be required based on the business and fact pattern.

Use an experienced valuator. There are a tremendous number of assumptions baked into any business valuation. Proper selection and weighting of those assumptions and choices require experience and will have a tremendous impact on your final value found. Being able to write a clear report and defend the valuation requires even more experience. Experience matters in business valuation. To select a proper valuator know the following:

  • Have they performed SBA business valuations?  (this is important as the SBA has some slightly different requirements from other valuations)
  • Have they performed over 25 business valuations?  (judgment is gained in practice)
  • Are they approved by your bank? (some banks have their “own” lists)
    • Recognize that while an opinion of value is a specific number due to the large quantity of assumptions and adjustments coming into play, valuations can reasonably come in over a range. Most valuators feel that two valuations with values within 10% of each other have pretty much found the same value.
    • Typically the SBA business valuation will take anywhere from one to two weeks from when all documents are provided (not the order date) depending on the size and complexity of the work. Often additional documents will be needed after the first set is reviewed.  Provide those documents as quickly as possible to keep your costs down and speed up the process.
    • Finally, realize that your valuation is likely to cost less if your records are clear and you provide the valuator all of the documents in an organized fashion. The longer it takes to get documents and the more work the valuator has to do just to get the documents in working order, the more your valuation will cost.

To learn more about business valuations, please download our e-book: “7 Things You Must Know Before You Order a Business Valuation” 

About the Author:  Gregory R. Caruso, JD, CPA, CVA, Partner at Harvest Business Advisors. Greg is the Editor In Chief of “Around the Valuation World” for the NACVA. Harvest has performed over one hundred SBA business valuations and hundreds of other business valuations. Greg can be reached at gcaruso@harvestbusiness.com.


 

Clients choose Harvest Business Advisors for our accurate business valuations and our consistent ability to deliver a high price as part of a smooth exit transaction.

Harvest Business Advisors provides business brokerage, business valuation, and business succession planning services. We have extensive experience in the information technology and professional services, manufacturing, distribution, and contracting fields. We maintain offices in Maryland, New Jersey and Virginia. Connect with us at info@harvestbusiness.com or 877.838.4966 to discuss selling your business, ordering a business valuation or buying a business.

Business Brokers Guide to Building Business Value – Sales and Marketing Systems

Business Brokers Guide to Building Business Value – Sales and Marketing Systems

Business Brokers Guide to Building Business Value for Business Owners – Developing a Sales and Marketing System

“We see that Bob, while a talented engineer, is really an excellent technical salesperson.  We want Bob on our team and will acquire your business to get him.”

On the other side of the equation, Bob was excited to have the opportunity to sell more services at the larger firm that was acquiring the company where he was employed.

This true story shows the power of having a good sales force that is not dependent on you as the owner. 

At engineering firms, often all sales are made by the Partner Owners.  In this case, it had been delegated to a talented younger engineer.  Simply because the main salesperson was staying with the selling company after the sale the risk to the buyer was reduced –  and the price went up.

Considering Selling Your Business? Please click here for a downloadable e-book, “ 10 Ways to Increase the Value of Your Business“.

Great systems where decisions can be made without you, the owner, necessarily being involved increase the value of the business.

Having a sales system that does not involve the owner is even more powerful as it means the client relationships do not all rest with you – because you intend to leave.  The sales systems rest with your employees who will stay.

Continuity in client relationships is a powerful indicator that your business and business profits are transferable.

Look at how you can build your business to include a sales process that does not require you and build your business value.

 Clients choose Harvest Business Advisors for our accurate business valuations and our consistent ability to deliver the highest price in the smoothest sale transaction possible. Harvest provides business brokerage, business valuation, and business succession planning services. We have extensive experience in the information technology and professional services, manufacturing, distribution, and contracting fields. We maintain offices in Maryland, New Jersey and Virginia. Connect with us at info@harvestbusiness.com or 443.334.8000 to discuss selling your business, ordering a business valuation or buying a business.

NACVA New Jersey Business Valuation Conference Slides

NACVA New Jersey Business Valuation Conference Slides

The New Jersey Chapter of the NACVA is pleased to be hosting a All-Day conference on business valuation Wednesday, November 28, 2018.

Please click on the Links to download the slides for the programs.  Printed copies will NOT be available at the site.

NACVA NJ 2018 Hitchner Best Business Valuation Practices

Duff Phelps Cost of Capital Navigator Jim HARRINGTON

NJ NACVA Business Valuation Calculations USPAP Carla Glass – 2018

NJ NACVA Carla Glass November 2018 Stout Studies

NJ NACVA Glass 2018 Partnership Profiles

If you would like copies of these slides please contact Greg Caruso

Enjoy the day.  We look forward to seeing you at the Edison, Hilton Garden Inn.

Greg Caruso, a Partner at Harvest Business Advisors is a Past President of the New Jersey NACVA.

 

Jay Fishman Covering “Right of Publicity” to be on “Around the Valuation World”

Jay Fishman Covering “Right of Publicity” to be on “Around the Valuation World”

“Around the Valuation World”, the NACVA’s monthly continuing education webinar on business valuation, has the following upcoming lineup on November 19:

  • Jay Fishman is being interviewed by Cheryl Hyder on the  “Right of Publicity”.  Jay has been involved in the Estate of Michael Jackson case and other cases involving this right.  This interesting intangible asset will be further explored.
  • Essential Business Valuation Industry Updates by Michael Gregory.  News from BV Resources summarized.
  • Robert Castro is bringing us valuable information on Building Your Brand, techniques to improve your Business Valuation practice.
  • Ed Mofrad is interviewing Zachary Meyers on Business Valuation Standards.

This November 19 webinar begins at 1:00 P.M. Eastern time and runs until approximately 2:45 P.M. eastern time.

Members of the NACVA may click here and login to receive a free inviteOthers may click here to learn more. 

For Harvest’s complementary E-Book “7 Things You Should Know Before Ordering a Business Valuation” click here.  This guide will help you save money and simplify obtaining a business valuation.

“Around the Valuation World”, is the NACVA’s monthly continuing education webinar on business valuation.  It is edited and hosted by Greg Caruso, JD, CPA, CVA and Partner at Harvest Business Advisors, business valuation experts and business brokers.

SBA Business Valuation for SBA Financing of Business Sales – Presentation

Thank you for the opportunity to share some thoughts on SBA business valuation for SBA loans directed at SBA lenders and their advisors.

(Based on a SBA business valuation presentation presented to the Maryland Commercial Lenders Association on September 26, 2018.

Business valuations are all about understanding the drivers that bring value to a business and how valuators are required to measure those drivers.  An important place to start is with the questions;

  • Who is the value is being calculated for?
  • What is the standard of value to be used?
  • What is the purpose of the valuation?
  • Why is the valuation being conducted?

In general, for SBA purposes a third party appraisal is required when financing business sale transactions if:

  • the amount being financed after deducing for the appraised value of equipment and real estate is more than $250,000,
  • there is a close relationship between the buyer and seller – family members / partners /employees, or
  • the lenders internal policies require it.

I hope you enjoy the presentation and learn a few things you can apply tomorrow from it.

Questions or to contact:

Presenter, Greg Caruso, JD, CPA, CVA
gcaruso@harvestbusiness.com 609-664-7955

 


Clients choose Harvest Business Advisors for our accurate business valuations and our consistent ability to deliver a high price as part of a smooth exit transaction.
Harvest Business Advisors provides business brokerage, business valuation, and business succession planning services. We have extensive experience in the information technology and professional services, manufacturing, distribution, and contracting fields. We maintain offices in Maryland, New Jersey and Virginia.
Connect with us at info@harvestbusiness.com or 443.334.8000 to discuss selling your business, ordering a business valuation or buying a business.

 

 

 

 

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Calculating Lost Profits for Business Valuation Professionals

Business valuation professionals often are asked to calculate lost profits for business interruption, intellectual property infringement cases, and other business damage calculation purposes.

This short video summarizes some very important principals for calculating lost profits by business valuation professionals.

In the video, Everett Harry is interviewed by Gregory Caruso, Partner, at Harvest Business Advisors.  Everett Harry is Editor of the book, “Lost Profits Damages”.  Everett has spent a lifetime working on lost profits cases.

 

Want to know more?  Please click here for the downloadable e-book. “7 Things You Must Know Before You Order a Business Valuation” 

Clients choose Harvest Business Advisors for our accurate business valuations and our consistent ability to deliver the highest price in the smoothest sale transaction possible.

Harvest provides business brokerage, business valuation, and business succession planning services. We have extensive experience in the information technology and professional services, manufacturing, distribution, and contracting fields. We maintain offices in Maryland, New Jersey and Virginia. Connect with us at info@harvestbusiness.com or 443.334.8000 to discuss selling your business, ordering a business valuation or buying a business.

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