{"ok":true,"canonical_url":"https://dealroom.so/glossary/cost-approach","api_url":"https://dealroom.so/api/public/glossary/cost-approach","data_freshness":{"sba_records_through":"2026-05-31","fdic_records_through":"2026-03-31","dealroom_last_updated":"2026-06-15","timezone":"America/Chicago"},"source_summary":["Public SBA 7(a) loan records","FDIC institution data","DealRoom lender and franchise enrichment"],"term":{"slug":"cost-approach","term":"Cost approach","group":"Reading the business","definition":"This valuation method estimates an asset's value by calculating the cost to replace it new, minus depreciation. It's often used for valuing tangible assets like real estate or equipment.","what_it_means":"You'll encounter the cost approach in appraisal reports when valuing significant tangible assets, such as owner-occupied commercial real estate or specialized equipment. It helps establish a floor value for these assets, complementing income-based valuations for the overall business. Understand how this approach contributes to the total business valuation.","url":"https://dealroom.so/glossary/cost-approach","official_sources":[],"related":[{"slug":"business-valuation","term":"Business valuation","url":"https://dealroom.so/glossary/business-valuation"},{"slug":"appraisal-report","term":"Appraisal report","url":"https://dealroom.so/glossary/appraisal-report"},{"slug":"tangible-asset","term":"Tangible asset","url":"https://dealroom.so/glossary/tangible-asset"},{"slug":"fair-market-value","term":"Fair market value","url":"https://dealroom.so/glossary/fair-market-value"}],"related_questions":[{"question":"What factors primarily influence the premium cost of business life insurance?","url":"https://dealroom.so/sba-7a/questions/what-factors-primarily-influence-the-premium-cost-of-business-life-insurance"},{"question":"Can an SBA 7(a) loan cover the cost of inventory for a business?","url":"https://dealroom.so/sba-loans/basics/can-an-sba-7-a-loan-cover-the-cost-of-inventory-for-a-business"},{"question":"Can an SBA 7(a) loan cover the cost of a business valuation or appraisal?","url":"https://dealroom.so/sba-7a/questions/can-an-sba-7-a-loan-cover-the-cost-of-a-business-valuation-or-appraisal"},{"question":"What percentage of the project cost does the SBA typically expect as a down payment?","url":"https://dealroom.so/sba-loans/basics/what-percentage-of-the-project-cost-does-the-sba-typically-expect-as-a-down-payment"},{"question":"Can an SBA 7(a) loan cover the cost of a franchise transfer fee in an acquisition?","url":"https://dealroom.so/sba-7a/questions/can-an-sba-7-a-loan-cover-the-cost-of-a-franchise-transfer-fee-in-an-acquisition"},{"question":"Can an SBA 7(a) loan cover the cost of relocating the acquired business to a new facility?","url":"https://dealroom.so/sba-7a/questions/can-an-sba-7-a-loan-cover-the-cost-of-relocating-the-acquired-business-to-a-new-facility"}]},"caveats":["Definitions represent DealRoom's plain-English interpretation for buyers; verify regulatory terms against the official SBA and eCFR sources listed.","Not legal, tax, or financial advice, and not an SBA eligibility determination."],"citation":{"label":"DealRoom.so Glossary — Cost approach","url":"https://dealroom.so/glossary/cost-approach","source_type":"DealRoom Data"}}