{"ok":true,"canonical_url":"https://dealroom.so/glossary/replacement-cost-approach","api_url":"https://dealroom.so/api/public/glossary/replacement-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":"replacement-cost-approach","term":"Replacement cost approach","group":"Reading the business","definition":"A business valuation method that estimates the cost to replace a business's assets with new ones of similar utility. It's less common for small businesses unless they're asset-heavy, as it often undervalues goodwill.","what_it_means":"This approach is rarely the primary method for valuing an operating small business in a 7(a) deal, as it typically doesn't account for the business's ongoing cash flow or intangible value. However, it might be used to value specific assets like equipment or real estate as part of a broader appraisal. Focus on cash flow-based valuations for the business itself.","url":"https://dealroom.so/glossary/replacement-cost-approach","official_sources":[],"related":[{"slug":"business-valuation","term":"Business valuation","url":"https://dealroom.so/glossary/business-valuation"},{"slug":"appraisal","term":"Appraisal","url":"https://dealroom.so/glossary/appraisal"},{"slug":"goodwill","term":"Goodwill","url":"https://dealroom.so/glossary/goodwill"},{"slug":"tangible-asset","term":"Tangible asset","url":"https://dealroom.so/glossary/tangible-asset"}],"related_questions":[{"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"},{"question":"Can an SBA 7(a) loan cover the cost of initial marketing and advertising for the acquired business?","url":"https://dealroom.so/sba-7a/questions/can-an-sba-7-a-loan-cover-the-cost-of-initial-marketing-and-advertising-for-the-acquired-b"}]},"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 — Replacement cost approach","url":"https://dealroom.so/glossary/replacement-cost-approach","source_type":"DealRoom Data"}}