SBA 7(a) Q&A
Short answer
The SBA determines the reasonableness of the purchase price through a formal, independent business valuation, especially for loans over $500,000.
For business acquisitions, the SBA requires an independent business valuation to ensure the purchase price is fair market value and that the loan amount is justified. For loans over $500,000, this valuation must be performed by a qualified, disinterested third-party appraiser. The valuation supports the economic soundness of the transaction.
A buyer agrees to purchase a business for $1,200,000. An independent appraiser is engaged, who determines the fair market value to be $1,150,000. The lender and SBA will base the loan on the appraised value, not the higher agreed-upon price.
Insider move
Lenders need to confirm that the business is not overvalued, as this directly impacts the loan's collateral and repayment ability. An accurate, independent valuation is crucial for underwriting and to protect the SBA's guaranty.
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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