409(a) Appraisals
Issuing options or equity compensation? Quantive performs appraisals for 409(a) reporting requirements.
7(a) Loan Appraisal Requirements
The SBA has processed over 43,000 loans worth almost $16 billion already in fiscal year 2016, succeeding the totals from the previous five years. Clearly, more individuals are buying and selling businesses. Amongst the multitude of actions that must take place before, during, and after the transaction, the business appraisal or valuation is one of, if not the most, important task that needs to be accomplished.
The business appraisal assists the buyer in making a determination that the asking price is supported by an independent, unbiased, and qualified source. Closing delays occur when there is not a qualified valuation firm performing the appraisal. According to the SBA lending program rules, the business appraisal must be requested by the lender and not the seller or the loan applicant.
So what or who is a qualified source? In SBA SOP 50 10 5(H) that is defined as “an individual who regularly receives compensation for business valuations” and is accredited by one of the following:
- Certified Valuation Analyst (CVA) accredited through the National Association of Certified Valuation Analysts
- Accredited Senior Appraiser (ASA) accredited through the American Society of Appraisers
- Certified Business Appraiser (CBA) accredited through the Institute of Business Appraisers
- Accredited in Business Valuation (ABV) accredited through the American Institute of Certified Public Accountants
- Accredited Valuation Analyst (AVA) accredited through the National Association of Certified Valuation Analysts
- Accredited Business Certified Appraiser (ABCA) accredited through the International Society of Business Analysts.
50 10 5 (H) also describes two categories states who must complete the business appraisal in each situation. When the loan is less than $250,000, the lender may perform its own valuation of the business. However, if the loan exceeds $250,000 or if there is a close relationship between the buyer and seller, family for example, the lender must get an independent business appraisal form a qualified source.
Typically, the valuation firm will need documents similar to those used for the loan application and they will probably include:
- 3-5 Years of Company tax return
- Interim Statements (within 90 days of valuation date)
- AR and AP Aging
- Management forecast or budgeting (if available)
- Completed valuation questionnaire
- Purchase Agreement or LOI
- Internal loan write-up
Bottom line: Selling your company (or buying one) with an SBA guaranteed loan will not be an easy endeavor. Don’t delay the Valuation Process. Get with the lender about finding a trusted and certified Business Valuation Firm early on in the process and have the comfort that you will get your appraisal done in the appropriate amount of time.
What We Work On:
Exit Planning
Thinking about retirement? Planning for a sale? A business valuation typically is the starting point of any sound exit planning process.
Litigation Support
We provide litigation support for shareholder disputes, lost profits, shareholder oppression, commercial litigation, and various other reasons.
Buy-Sell
Quantive provides a business valuation in support of buy-sell agreements, to include buy-ins and buy-outs, as well as shareholder disputes.
Estate and Gift
We perform company valuations in support of various gifting strategies, as well as in support of probate requirements.
SBA Loans
A core part of our practice is preparing business appraisals for SBA loans, as required by the SBA SOP.
Selling a Business
Your company is probably your largest asset. A business valuation for selling a company just makes good sense.
Buying a Business
Smart entrepreneurs routinely retain Quantive to understand price early and gain a roadmap for impending price negotiations.
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Quantive is a veteran owned and operated financial services firm. We work exclusively on matters related to corporate value: business valuation, value growth, and M&A advisory.