For every business owner, having access to adequate funds to sustain and grow their business represents the lifeblood of the company. The Small Business Administration’s (SBA) 7(a) loan program gives entrepreneurs an opportunity to obtain financing in situations that they may not have been able to otherwise. While the SBA doesn’t actually lend money itself, they do work closely with lenders to provide obtainable solutions therein. With the assistance of the SBA, risks are reduced, which opens the door that may have been permanently closed if only working with traditional financing methods. By guaranteeing the loan, an SBA backed loan allows the borrower to gain longer/better terms, additional support and additional benefits which will provide a clearer path to ultimate success.
The 7(a) loan represents the primary loan program that the SBA utilizes and consequently it is their most popular program by far. The proceeds of the loan can be used for both working capital and fixed assets including such purposes as purchasing or expanding an existing business, the cost of purchasing land and new construction, to refinance existing debt, or purchasing new assets such as equipment, fixtures, furniture, etc. The basic eligibility requirements of a 7(a) loan include being a for-profit business and doing business in the United States. In addition, the owner must have equity invested in the business in the form of time or money as well as having previously been denied traditional financing.
While there are many steps involved with applying for a 7(a) loan, one of the required steps may be obtaining an independent business valuation. Per the SBA Standard Operating Procedures, a valuation may be required for a 7(a) loan under the following situations:
i. If the amount being financed (including any 7(a), 504, seller, or other financing) minus the appraised value of real estate and/or equipment being financed is $250,000 or less, the lender may perform its own valuation of the business being sold, unless the lender’s internal policies and procedures require an independent business appraisal from a qualified source.
ii. 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.
When a valuation is required, the SBA stipulates that a “qualified source” must produce the valuation. Per the SBA stipulations;
A “qualified source” is an individual who regularly receives compensation for business valuations and is accredited by one of the following recognized organizations:
(a) Accredited Senior Appraiser (ASA) accredited through the American Society of Appraisers;
(b) Certified Business Appraiser (CBA) accredited through the Institute of Business Appraisers;
(c) Accredited in Business Valuation (ABV) accredited through the American Institute of Certified Public Accountants;
(d) Certified Valuation Analyst (CVA) accredited through the National Association of Certified Valuation Analysts;
(e) Accredited Valuation Analyst (AVA) accredited through the National Association of Certified Valuation Analysts; and
(f) Business Certified Appraiser (BCA) accredited through the International Society of Business Appraisers
With this information in mind, when preparing to take the next step in the journey of growing your business, make sure that you carefully consider who will be providing the business valuation, should one be required. Only a report completed by someone who meets the above stated requirements will be considered valid for the purposes therein. You can rest assured that ValuePointe.biz has the experience and qualifications to assist you as you move your company forward to the next level.
For additional information regarding the loans offered by the Small Business Administration, visit the SBA’s website at www.SBA.gov