SBA 7(a) Q&A
Short answer
The SBA ensures the reasonableness of goodwill allocation through a required independent business valuation, which analyzes the tangible and intangible assets of the business being acquired.
For business acquisitions, especially those with significant goodwill, an independent valuation by a qualified appraiser is mandatory. This valuation explicitly allocates the purchase price among assets, including equipment, real estate, inventory, and intangible assets like goodwill, to ensure the allocation is fair and commercially reasonable.
A buyer acquires a service business for $800,000. The independent valuation allocates $150,000 to tangible assets and $650,000 to goodwill, supported by strong historical earnings. The SBA lender reviews this allocation to confirm it is reasonable and reflects the business's true value.
Insider move
Lenders use the business valuation to verify that the purchase price, and specifically the goodwill component, is justified by the business's earnings potential and assets. They look for reasonable allocation to prevent overfinancing of intangible assets.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 - Lender and Development Company Loan Programs
Last checked 2026-06-14. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-14 · SBA sources checked through 2026-06-14. 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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