SBA 7(a) Q&A
Short answer
The SBA relies on an independent business valuation from a qualified appraiser to establish the fair market value of goodwill.
When goodwill is a significant component of a business acquisition, especially for transactions over $500,000, the SBA requires an independent business valuation. This valuation uses recognized methodologies (e.g., discounted cash flow, market multiples, asset-based approaches) to determine the fair market value of the entire business, from which the goodwill component can be derived (total value minus tangible assets).
For a $1,200,000 business acquisition, the lender engages a qualified appraiser. The appraisal calculates the business's total fair market value as $1,200,000. If tangible assets are $300,000, the remaining $900,000 is attributed to goodwill, which the SBA accepts if the appraisal is sound.
Insider move
Lenders scrutinize the appraiser's qualifications, the methodology used, and the assumptions made in the valuation. They must ensure the valuation is robust and justifies the purchase price, particularly the goodwill portion, to protect the SBA guaranty.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
7(a) Loan Program — Terms, Conditions, and Eligibility
U.S. Small Business Administration · Official SBA source
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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