{"ok":true,"canonical_url":"https://dealroom.so/glossary/income-approach","api_url":"https://dealroom.so/api/public/glossary/income-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":"income-approach","term":"Income Approach","aka":"Discounted cash flow, Capitalization of earnings","group":"Reading the business","definition":"This is a business valuation method that estimates value based on the business's expected future income or cash flow. It's widely used for operating businesses.","what_it_means":"The SBA and lenders heavily rely on the Income Approach to determine the Fair Market Value of a business, particularly through discounted cash flow or capitalization of earnings methods. This directly impacts how much the SBA will finance.","url":"https://dealroom.so/glossary/income-approach","official_sources":[{"slug":"sop-50-10","title":"SOP 50 10 — Lender and Development Company Loan Programs","official_url":"https://www.sba.gov/document/sop-50-10-lender-development-company-loan-programs","official_label":"View on SBA.gov","authority_tier":2,"publisher":"U.S. Small Business Administration","source_guide_url":"https://dealroom.so/sba-7a/sources/sop-50-10"}],"related":[{"slug":"business-valuation","term":"Business valuation","url":"https://dealroom.so/glossary/business-valuation"},{"slug":"cash-flow","term":"Cash flow","url":"https://dealroom.so/glossary/cash-flow"},{"slug":"asset-approach","term":"Asset Approach","url":"https://dealroom.so/glossary/asset-approach"},{"slug":"fair-market-value","term":"Fair market value","url":"https://dealroom.so/glossary/fair-market-value"}],"related_questions":[{"question":"What if the acquired business primarily generates revenue from passive rental income?","url":"https://dealroom.so/sba-7a/questions/what-if-the-acquired-business-primarily-generates-revenue-from-passive-rental-income"},{"question":"What constitutes \"passive income\" disqualifying a business from 7(a) loan eligibility?","url":"https://dealroom.so/for-lenders/questions/what-constitutes-passive-income-disqualifying-a-business-from-7-a-loan-eligibility"},{"question":"What if my personal tax returns show inconsistent income or losses from other ventures?","url":"https://dealroom.so/sba-7a/questions/what-if-my-personal-tax-returns-show-inconsistent-income-or-losses-from-other-ventures"},{"question":"Do businesses that primarily generate passive income qualify for an SBA 7(a) loan?","url":"https://dealroom.so/sba-loans/basics/do-businesses-that-primarily-generate-passive-income-qualify-for-an-sba-7-a-loan"},{"question":"Is there an income limit for my business to be \"small\" by SBA rules?","url":"https://dealroom.so/sba-loans/basics/is-there-an-income-limit-for-my-business-to-be-small-by-sba-rules"},{"question":"What if the business I'm buying has existing deferred revenue or unearned income?","url":"https://dealroom.so/sba-7a/questions/what-if-the-business-i-m-buying-has-existing-deferred-revenue-or-unearned-income"}]},"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 — Income Approach","url":"https://dealroom.so/glossary/income-approach","source_type":"DealRoom Data"}}