For SBA lenders
Short answer
Underwriting a business with significant intangible assets requires robust due diligence on the value and sustainability of those assets, typically including an independent valuation, intellectual property review, and detailed cash flow analysis demonstrating future earnings potential.
For 7(a) loans where intangible assets (e.g., goodwill, patents, software) represent a substantial portion of the purchase price, lenders must verify their value and contribution to future cash flow. An independent business valuation from a qualified appraiser is essential, focusing on the revenue generation capacity and market position derived from these intangibles. The lender must ensure the business's projected cash flow supports debt repayment, particularly when relying on intangible asset value.
A borrower applies for a 7(a) loan to acquire a software development company whose primary asset is its proprietary code and customer contracts. The lender requires a business valuation that specifically addresses the software's market value, intellectual property protections, and projected revenue streams. The lender also performs extensive cash flow analysis on the projected recurring revenue from software licenses.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 - Lender and Development Company Loan Programs
Last checked 2026-06-13. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-13 · SBA sources checked through 2026-06-13. DealRoom analysis of public SBA 7(a) lending records (FY2020–present). Grounded in the current SBA rulebook; verify against the official sources above before relying on it for a live deal. Not legal, tax, or financial advice, and not an approval decision.
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