Business appraisers will often refer to and use multiples of Seller’s Discretionary Earnings, or SDE, when discussing or calculating firm value.
SBA Business Valuation Guidelines in 2021
There are many different factors to consider when a business needs to apply for an SBA loan; the Small Business Administration lays out all of its requirements in its current Standard Operating Procedures (SOP 50 10 6). The document explains the specific requirements that are necessary when a business wishes to qualify for a loan.…
What are Seller’s Discretionary Earnings?
Seller’s Discretionary Earnings is a measure of the total financial benefit available to a single owner working in the firm on a full-time basis.
SBA Business Appraisal Guidelines
The Small Business Administration (SBA) provides extensive business appraisal guidelines in its most recent SBA SOP 50 10 5 (K), effective as of April 1st, 2019, with regard to business appraisal requirements for SBA-sponsored 7(a) loans. The entire SOP document is over 400 pages long; so, to make things easier for the reader, below we…
Business Valuation Approaches
What are the three main business valuation approaches? First, let’s start with ‘what is a valuation approach?’ A valuation approach is a process used to arrive at an indication of economic value of an owner’s interest in a business. The three most common valuation approaches are the income, market, and asset approaches. The income approach determines…
SBA Business Valuation Methods
When lenders value a business for an SBA loan, the Small Business Administration does not require that the business valuation include any specific business valuation method. However, the SBA does provide lenders a set of valuation methods that are termed “acceptable.” These acceptable SBA business valuation methods are summarized below: Gross Revenue Multiplier – This…
An SBA Business Valuation Calculator?
Frequently asked question: Is there an “SBA business valuation calculator?” Short answer: No, there isn’t. When I first saw the question, I thought “of course not.” The process of valuing a business is far too complex with way too many variables to be encapsulated in a calculator. However, a quick search shows that some companies…