SBA 7(a) Q&A
Short answer
An independent business valuation is required for all 7(a) change-of-ownership transactions exceeding $500,000, and for all transactions involving related parties (regardless of amount), to ensure fair market value.
The SBA mandates objective, third-party valuations to verify the reasonableness of the purchase price and prevent inflated values, particularly when there's a potential for non-arm's length dealings. This protects the integrity of the loan and ensures prudent lending practices.
If a business is purchased from a parent for $400,000, even though below the $500,000 threshold, an independent valuation is still mandatory because it is a related-party transaction.
Insider move
Lenders engage qualified appraisers and critically review the valuation report. They confirm the appraiser's independence and the methodology used to ensure the concluded value supports the proposed acquisition price and aligns with SBA requirements.
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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