Business Appraisal for an SBA Loan
Securing financing is often the first hurdle aspiring entrepreneurs and business owners face. For those eyeing a Small Business Administration (SBA) loan, a business appraisal is key. With this official valuation, you can secure SBA financing for a small business. In this article, we explain how to obtain a business appraisal for an SBA loan.
Peak Business Valuation helps businesses across the U.S. secure SBA financing! As a certified business appraiser, we conduct hundreds of SBA business appraisals. In fact, we work with a network of more than 90 SBA lenders. First, we can connect you with a quality SBA lender. Second, we can provide an official SBA business valuation for your SBA loan application. Schedule a consultation to obtain a business appraisal for an SBA loan.
The Role of SBA Loans in Small Business Financing
SBA loans are a lifeline for entrepreneurs. They can help launch new ventures, expand existing operations, and navigate unforeseen challenges. The Small Business Administration (SBA) makes this catalyst for small business growth possible. In the event of a default, the SBA guarantees a portion of the loan, providing lenders with a safety net. As a result, SBA lenders face less risk and a greater incentive to finance small businesses with SBA loans. Below are several advantages of SBA loans compared to traditional loan options:
- Rates and fees that are comparable or less than non-guaranteed loans
- The SBA offers continued support to help you start and run a small business
- Lower down payments – as little as 10%
- Flexible overhead requirements
- Little to no collateral is needed for some loans
These benefits of an SBA loan may be useful if you are starting or growing a small business. To obtain an SBA loan for a small business, you may need an official SBA business appraisal. We discuss how to get an SBA business valuation in the section below.
Understanding SBA Business Appraisals
An SBA business appraisal is a thorough valuation of a business’s financial health. Trained professionals, or business appraisers, analyze various factors. These include the business’s revenue streams, assets, liabilities, market conditions, and industry trends. With careful research and calculation, a business appraiser can uncover valuable insights. They can identify the business’s fair value, value drivers, and risks. It serves as a critical assessment tool for both lenders and borrowers in the SBA loan process.
The lender will order an SBA business appraisal or SBA business valuation from their list of approved vendors. An independent, third-party certified business appraiser must provide it. Peak Business Valuation works with more than 90 SBA lenders across the country. We would love to help you with your SBA business valuation for SBA financing!
Importance of Business Appraisals for SBA Loans
A business must demonstrate its viability to SBA lenders to receive an SBA loan. SBA lenders often request an SBA business appraisal as part of the loan underwriting process. Lenders rely on business appraisals to assess the risk associated with extending credit. And, lenders can ensure that the loan amount aligns with the business’s fair value. A thorough SBA business valuation can boost the confidence of an SBA lender. As a result, you have a higher likelihood of loan approval and securing favorable terms. A business appraisal for an SBA loan also offers valuable insights to the business owner.
Peak Business Valuation conducts official, third-party SBA business valuations. We offer one of the quickest turnaround times for an SBA business appraisal. Schedule a consultation to learn more about the next steps for securing an SBA loan or SBA business valuation!
Maximizing the Benefits of an SBA Business Appraisal
An SBA business appraisal also offers valuable insights for business owners and entrepreneurs. During the business appraisal, a business appraiser conducts extensive research. Along the way, the business’s strengths, weaknesses, and growth opportunities become apparent. You can review these findings in the business valuation report. As a result, the path forward becomes clear. Capitalize on the strengths. Address the weaknesses. Invest in the opportunities. These steps can position the business more competitively in the market. Plus, you can improve the business’s standing in the eyes of potential lenders.
Steps to Obtaining a Business Appraisal for an SBA Loan
Below are the main steps for obtaining a business appraisal for an SBA loan:
1. Choose an SBA lender
First, find and select a quality SBA lender. They will walk you through the steps for securing an SBA loan. SBA lenders specialize in different industries and business appraisal needs. Peak Business Valuation can connect you with an SBA lender that matches your industry and needs. During the SBA loan underwriting, an SBA lender will request an SBA business valuation from a certified business appraiser if needed. Typically, the SBA lender has a network of appraisers they work with.
2. Initial Inquiry and Engagement Letter
At the SBA lender’s request, Peak Business Valuation gathers details about the business’s industry, size, revenue, and goals. Then, we send a quote to the SBA lender with the SBA business appraisal’s timeline and cost. If the quote is accepted, Peak sends an engagement letter for the lender to sign. Once signed and returned, our team begins the SBA business valuation.
3. Document Collection
Next, through a secure channel, we collect documents necessary for the SBA business appraisal. Many of these documents are already provided to the SBA lender as documents needed for an SBA loan. A few examples are tax returns, financial statements, owner’s discretionary earnings, etc. For a more complete list, see Documents Required for an SBA Loan. With these documents, our team can conduct a thorough analysis of the business. Our team of certified business appraisers reviews all the documents and will send a list of clarifying questions if needed.
4. Research and Analysis
A business appraiser then conducts market research. This involves in-depth research of the business’s position within its industry and market. Our team also identifies the business’s value drivers and potential risks.
5. Business Valuation Model and Methods
Next, a business appraiser builds a valuation model. They use several valuation methods to determine the business’s fair value. These often include the market, income, and cost approaches. The use of one or more methods depends on the business and business appraisal needs.
6. Valuation Report Delivery and Discussion
Finally, our team writes and delivers an SBA business valuation report to the SBA lender. This report details the business’s fair value, value drivers, and risks. And, the report includes all supporting analysis and research. We want to ensure the lender understands the findings and how to use them. The SBA loan underwriter then reviews the SBA business valuation to use in the loan approval process.
The Bottom Line
To conclude, starting, buying, or expanding a business can be an exciting endeavor. At the same time, it may exceed your budget. As such, the SBA offers many financing options to help small businesses grow. The SBA lender may need an SBA business appraisal to approve financing. An SBA business valuation requires thorough research and calculation. An accurate and thorough appraisal can help you unlock financing and secure favorable loan terms. Seek a quality business appraiser to conduct a business appraisal for an SBA loan.
As a certified business appraiser, Peak Business Valuation works with businesses across the country. We conduct SBA business valuations for individuals to secure SBA financing. As such, we have a close network of more than 90 reputable SBA lenders. We can connect you with an SBA lender experienced with your industry and appraisal needs. Start now with a complimentary consultation! This brief meeting will bring you one step closer to securing financing for a small business.
