Valuations for SBA Loans

The SBA 7(a) loan program is one of the most common and accessible ways for small businesses to fund growth and operations.  Under the program, and SBA Lender writes the loan and the SBA then guarantees a portion of that loan.  There are circumstances when the SBA mandates a 3rd Party (such as Quantive) performs a valuation for the SBA Loan.

 

Background

The SBA 7(A) loan program is the largest lending vehicle that the SBA uses.  Under the program, borrowers can borrow up to $5.0 million dollars.  Loans can be used to:

  • Fund working capital requirements
  • Complete equipment purchases
  • Fund growth
  • Acquire a business

As you can imagine, as a government related program the 7(a) program has many “strings” attached.  The entire loan program is outlined in the “SOP.”

 

Valuation Requirements

For change of control circumstances, the SBA requires a 3rd party business valuation under certain circumstances.  Specifically, a SBA Loan business valuation is required if the “goodwill” – or “blue sky” – portion of the loan exceeds $250,000.

Who Can Perform the Valuation?

The SBA requires that the valuation be performed by a “Qualified Source.”  In our case, our analysts are Certified Valuation Analysts (CVA’s), which per Chapter 4, pargraph 5.(c)3, meets all requirements for the performance of the valuation.

X