The new SBA SOP 50 10 5 (I) was released on November 22, 2016 with a effective date January 1, 2017.
There was little to no changes to the business valuation requirements. Here is a summary of those requirements -
Business Appraisal Requirements – Change of Ownership
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.
In order for the individual performing the business appraisal to identify the scope of work appropriately, the business appraisal must be requested by and prepared for the lender. The scope of work should identify whether the transaction is an asset purchase or stock purchase and be specific enough for the individual performing the business appraisal to know what is included in the sale (including any assumed debt). The business appraisal must include the individual’s opinion of value, the qualifications of the individual performing the appraisal and their signature certifying to the information contained in the appraisal. The lender may not use a business appraisal prepared for the applicant or the seller. The cost of the appraisal may be passed on to the Small Business Applicant.
The value of the intangible assets is determined by either the book value as reflected on the business’s balance sheet, a separate appraisal for the particular asset, or the value of the business as identified in the business appraisal minus the sum of the working capital assets and the fixed assets being purchased.
Please reach out to Brandon Hall at firstname.lastname@example.org or 763-898-8653 if you have any further questions regarding business valuations for SBA purposes.