{"ok":true,"canonical_url":"https://dealroom.so/sba-7a/questions/what-is-the-maximum-percentage-of-the-purchase-price-that-can-be-allocated-to-goodwill-in-","api_url":"https://dealroom.so/api/public/questions/what-is-the-maximum-percentage-of-the-purchase-price-that-can-be-allocated-to-goodwill-in-","question":"What is the maximum percentage of the purchase price that can be allocated to goodwill in an acquisition?","topic":"Goodwill Financing","audience":"borrower","bot_mode":"buyer","short_answer":"There is no specific maximum percentage of the purchase price that can be allocated to goodwill, as long as the overall purchase price is justified and reasonable.","rule":"The SBA does not set a hard cap on the percentage of goodwill in an acquisition. Instead, the focus is on the reasonableness of the total purchase price and its allocation, typically supported by an independent business valuation. The valuation must justify all components, including tangible assets, intangible assets, and goodwill, to ensure the business can support the debt.","example":"If you are acquiring a service-based business for $1,000,000, where tangible assets are only $100,000, and $900,000 is allocated to goodwill, this is permissible if the business valuation supports the entire $1,000,000 purchase price based on its earnings and cash flow.","what_lenders_check":"Lenders are concerned that the business's cash flow can service the debt, especially when goodwill is a significant portion of the acquisition. They rely heavily on a robust, independent business valuation to ensure the purchase price and its allocation are reasonable and sustainable.","required_facts":["Goodwill allocation","No specific cap","Independent valuation","Reasonable purchase price","Cash flow capacity"],"source_families":["13 CFR Part 120 - Business Loans"],"official_sources":[{"title":"13 CFR Part 120 - Business Loans","url":"https://www.ecfr.gov/current/title-13/chapter-I/part-120"}],"related_questions":[{"question":"Is there a maximum percentage of goodwill that an SBA 7(a) loan can finance in an acquisition?","url":"https://dealroom.so/sba-7a/questions/is-there-a-maximum-percentage-of-goodwill-that-an-sba-7-a-loan-can-finance-in-an-acquisiti"},{"question":"How does the SBA ensure the valuation of goodwill is reasonable for an acquisition loan?","url":"https://dealroom.so/sba-7a/questions/how-does-the-sba-ensure-the-valuation-of-goodwill-is-reasonable-for-an-acquisition-loan"}],"related_terms":[{"term":"Purchase price","url":"https://dealroom.so/glossary/purchase-price"},{"term":"Purchase price allocation","url":"https://dealroom.so/glossary/purchase-price-allocation"},{"term":"Goodwill","url":"https://dealroom.so/glossary/goodwill"},{"term":"Repair to the guaranty","url":"https://dealroom.so/glossary/repair-to-the-guaranty"},{"term":"Negative goodwill","url":"https://dealroom.so/glossary/negative-goodwill"},{"term":"Institutional investor","url":"https://dealroom.so/glossary/institutional-investor"}],"related_tools":[{"name":"SBA 7(a) payment & fee calculator","url":"https://dealroom.so/sba-7a/calculator"},{"name":"Find an active SBA 7(a) lender","url":"https://dealroom.so/lenders"}],"data_freshness":{"last_reviewed":"2026-06-14","sba_rule_sources_checked_through":"2026-06-14"},"citation":{"label":"DealRoom.so SBA 7(a) Q&A","url":"https://dealroom.so/sba-7a/questions/what-is-the-maximum-percentage-of-the-purchase-price-that-can-be-allocated-to-goodwill-in-","source_type":"DealRoom Q&A"},"caveats":["Grounded in the current SBA rulebook; verify against official sources before relying on it for a live deal.","Not legal, tax, or financial advice and not an approval decision."]}