NEW SBA SOP 50 10 5 (I) Released

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

  • Determining the value of a business (not including real estate which is separately valued through a real estate appraisal) is the key component to the analysis of any loan application for a change of ownership. An accurate business appraisal is required because the change in ownership will result in new debt unrelated to business operations and potentially the creation of intangible assets. A business appraisal assists the buyer in making a determination that the seller’s asking price is supported by an independent qualified source

  • Lender documentation MUST include a current business appraisal (not to include any real estate) by the lender or an independent third party hired by the lender with proven experience in business appraisals if there is a change of ownership. (See below for SBA’s business appraisal requirements.)

  • For a change of ownership, discussion/analysis of the business appraisal (based on generally accepted valuation methods used for the pertinent industry) used to support the purchase price.

  • 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.

  • If the application will be submitted to the LGPC, the business appraisal must be submitted as part of the loan application.

  • Any amount in excess of the business appraisal may not be financed with the SBA guaranteed loan.

  • 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 or 763-898-8653 if you have any further questions regarding business valuations for SBA purposes.

Featured Posts
Recent Posts
Search By Tags
Follow Us
  • LinkedIn Social Icon