SBA Business Valuation Requirements for a 7(a) Business Purchase
Under Appendix 15 of SOP 50 10 8.1, outside ESOP loans, the business valuation for an SBA 7(a) business purchase "must be requested by and prepared for the Lender", and a Qualified Source valuation analyst holds one of five credentials: ASA, CBA, ABV, CVA or BCA. The lender "may not use a business valuation prepared for the Applicant or the seller". Appendix 15 lets the lender perform its own valuation at a Business Purchase Price (price less appraised owner-occupied real estate) of $350,000 or less, unless buyer and seller have a close relationship; the 7(a) Small chapter and Notice 5000-882227 list that tier as a 7(a) Small and SBA Express rule, so on a Standard 7(a) loan, confirm it with your lender. Many guides print the superseded $250,000 test. If the price exceeds the valuation, the difference "must be made up by equity".
This is general information, not legal, lending or valuation advice; we are not a lender, an appraiser or attorneys. It covers 7(a) changes of ownership under Appendix 15 of SOP 50 10 8.1, for applications received by SBA on or after 1 October 2026, not 504 loans or ESOP purchases. Confirm with your lender before you sign.
When does the SBA require a business valuation to buy a business?
On every 7(a) change of ownership. Appendix 15 of SOP 50 10 8.1 says "Financial due diligence is required on all change of ownership transactions" and gives the reason:
An accurate business valuation is required because the change of ownership will result in new debt unrelated to business operations and the creation of intangible assets.
The valuation covers the business; the real estate "is separately valued through a real estate appraisal". Appendix 15 says the valuation helps the buyer determine that the asking price "is supported by an independent Qualified Source", but, unlike SOP 50 10 8, it no longer says the lender must obtain an independent valuation (table below). In the texts we read, this is SBA policy, not statute or regulation; 13 CFR 120.202 sets no valuation rule.
Is the SBA valuation threshold $250,000 or $350,000?
$350,000, measured on the Business Purchase Price. The $250,000 still printed on many pages is the SOP 50 10 8 test, which measured the amount financed.
If the Business Purchase Price is $350,000 or less, the Lender may perform its own valuation of the business being sold, unless there is a close relationship between the buyer and seller.
Appendix 3 defines the Business Purchase Price as "the price set by the purchase and sales agreement, less the portion of owner-occupied commercial real estate assets being acquired in the transaction", that portion "established by the appraised value". Appendix 15 makes the threshold independent of "the application of Borrower equity, structuring of seller debt", so a large down payment or a seller note does not bring a deal under the line.
| Point | SOP 50 10 8 (to 30 September 2026) | SOP 50 10 8.1 (from 1 October 2026) |
|---|---|---|
| Figure | $250,000 | $350,000 |
| Measured on | "the amount being financed (including any 7(a), 504, seller, or other financing) minus the appraised value of real estate and/or equipment being financed" | The Business Purchase Price; equipment is no longer removed |
| Above the line | "the Lender must obtain an independent business valuation from a Qualified Source" | No such sentence in the text we read |
| Lender's own policy as a trigger | "unless the Lender’s internal policies and procedures require an independent business valuation from a Qualified Source" | No such sentence in the text we read |
Does the $350,000 tier apply to a Standard 7(a) loan? The sources differ. Appendix 15 states it with no delivery method limit and governs on conflict. The 7(a) Small chapter lists it as a 7(a) Small and SBA Express modification and adds "This differs from the general Appendix 15 valuation requirements that require an independent valuation based on the transaction size and structure"; Notice 5000-882227 lists it the same way. On a Standard 7(a) loan, ask your lender.
Who can perform a business valuation for an SBA 7(a) loan?
A Qualified Source holding one of five credentials, unless the lender may value the business itself under the $350,000 tier above. Appendix 15 defines a Qualified Source for 7(a) business valuations as:
an individual who regularly receives compensation for business valuations and is accredited by one of the following recognized organizations and is independent of the loan production function, not involved in the approval of the transaction, and must not have the appearance of a conflict of interest
| Credential | As the SOP names it |
|---|---|
| ASA | "Accredited Senior Appraiser (ASA) accredited through the American Society of Appraisers" |
| CBA | "Certified Business Appraiser (CBA) accredited through the Institute of Business Appraisers" |
| ABV | "Accredited in Business Valuation (ABV) accredited through the American Institute of Certified Public Accountants" |
| CVA | "Certified Valuation Analyst (CVA) accredited through the National Association of Certified Valuation Analysts" |
| BCA | "Business Certified Appraiser (BCA) accredited through the International Society of Business Appraisers" |
The list has five lines and no catch-all for equivalent credentials, so a CPA license without the ABV is not on it. Where the purchase includes an owner-occupied Special Purpose Property, Appendix 15 names a Certified General Real Property Appraiser and requires the valuation to allocate values to land, building, equipment and intangible assets; see our SBA special purpose property list. An ESOP loan may use the ESOP's valuation made to ERISA specifications (Section A, Chapter 2).
Can the buyer or the seller order the SBA business valuation?
No. The lender requests it; a report prepared for either party cannot replace it.
For the individual performing the business valuation to identify the scope of work appropriately, the business valuation must be requested by and prepared for the Lender. The Lender may not use a business valuation prepared for the Applicant or the seller.
A buyer's own Quality of Earnings report has a review route: "Lenders may elect to have that report reviewed by one of their approved vendors". The valuation paragraph has none; in the text we read, the one exception is the ESOP rule above.
What must the business valuation contain, and what does the lender check?
A signed conclusion of value with the valuation analyst's qualifications, built on figures the lender checks against the seller's IRS transcripts. The scope of work should say whether the deal is an asset or stock purchase and what is included, including any assumed debt. On the report itself:
The business valuation must include the individual’s conclusion of value, the qualifications of the individual performing the business valuation, and their signature certifying the information contained in the business valuation.
The lender then checks the inputs:
Lender must obtain a copy of the financial information relied upon by the individual who performed the business valuation and verify that information against the seller’s IRS transcripts to ensure the accuracy of the information.
Section A, Chapter 5 adds: "For a change of ownership, the SBA Lender must verify the seller’s financial data, including a selling sole proprietor’s Schedule C".
What happens if the SBA business valuation is below the purchase price?
The gap becomes equity, and debt is capped at the valuation.
If the amount paid for the business exceeds the business valuation, the difference must be made up by equity.
Section A of Appendix 15 adds: "The total debt eligible to support a change of ownership transaction (including seller debt that is not on full standby) is limited to the business valuation amount and must be supported by the Debt Service Coverage of the Applicant". Under SOP 50 10 8 the cap was on the 7(a) loan's uses of proceeds, and capital financed to meet a shortfall "must be subordinate to the 7(a) loan".
Worked example, figures assumed. An Initial Acquisition, no close relationship between buyer and seller.
| Line | Amount | Rule applied |
|---|---|---|
| Price in the purchase and sale agreement | $900,000 | Contract |
| Appraised owner-occupied real estate | $300,000 | Removed first |
| Business Purchase Price | $600,000 | 900,000 less 300,000 |
| Over $350,000? | Yes | Qualified Source valuation for the lender (the general Appendix 15 rule, per the 7(a) Small chapter) |
| Business valuation, conclusion of value | $520,000 | Assumed |
| Price above the valuation | $80,000 | 600,000 less 520,000; must be made up by equity |
| Debt against the business price (real estate excluded) | At most $520,000 | 600,000 less 80,000; limited to the business valuation amount |
Excluding the $300,000 of real estate from the last row is our reading; the text we read does not say how the cap counts a loan on separately appraised real estate, so ask your lender. Nor does it say whether the $80,000 sits inside or on top of the minimum injection, "Initial Acquisition: 10%" of total project cost; confirm the treatment with your lender. See our SBA equity injection, SBA loan to buy a business and debt service coverage pages, and our how to price a business for an SBA buyer guide.
Who pays for the SBA business valuation, and when is it ordered?
The lender requests it and may pass the cost to you; an explicit sentence new in SOP 50 10 8.1 lets what you pay count toward your equity injection.
The out-of-pocket costs associated with all financial due diligence reports may be passed on to the borrower. Any funds expended by the Applicant on the report can count toward the equity injection.
The SOP 50 10 8 valuation paragraph said only that "The cost of the business valuation may be passed on to the Applicant". We have not surveyed valuation fees. For SBA Form 159 purposes, the lender's valuation analyst is not treated as an Agent: Section A, Chapter 4 excludes from the form a Qualified Source "employed by the 7(a) Lender to conduct an independent business valuation".
On timing, under PLP authority the valuation may be obtained after the SBA Loan Number is issued and before closing, but it "must have been formally engaged", with a vendor retained and an engagement letter in place, when the number is issued.
What do the seller's package and the buyer's plan have to show?
Figures that tie to the tax returns, and a plain statement of what each document is not.
For a seller. Because the lender checks the valuation analyst's inputs against your IRS transcripts, the normalized earnings schedule in your information memorandum is built to tie to the tax returns. Our Pricing Analysis gives you an indicative range, not the lender's valuation this page describes. See our business sale documents checklist.
For a buyer. Your acquisition business plan shows the Business Purchase Price net of real estate, sources and uses tested against the debt cap, and an equity-gap check once the lender has its valuation; see our business acquisition plan outline and the exit and acquisition documents hub.
Our Pricing Analysis is $1,250, a confidential information memorandum with blind teaser and data room index $2,800, and an acquisition business plan $1,800, or $2,800 with the acquisition model, all fixed. We never charge a percentage of anything you borrow, invest, raise or sell, and no part of our fee depends on a transaction completing. Every price we charge is on one page: /pricing.
Business Plan Firm is the US practice of Avvale, a London consultancy. We have written 1,000+ plans for 500+ founders across 30+ countries, and our clients have raised $500M+.
How we verified this
Every quotation was checked against raw source text on 30 October 2026.
- SBA SOP 50 10 8.1, effective 1 October 2026, the Word file SBA posted on 7 October 2026, linked from SBA's SOP 50 10 page, for every current rule, in Appendices 3 and 15, Section A Chapters 2, 4 and 5, and Section B Chapter 2.
- SBA Information Notice 5000-882227, 25 September 2026, for the text in effect and its 7(a) Small and SBA Express list.
- SBA SOP 50 10 8, effective 1 June 2025, for the superseded wording quoted above.
- 13 CFR 120.202, current text at the Legal Information Institute, to confirm it sets no valuation rule.
- Federal Register searches on 30 October 2026 for "business valuation" with "7(a)", and for "SOP 50 10", returned no documents since 1 June 2026.
Not verified, so not on this page: valuation fees and turnaround times; what counts as a close relationship, which Appendix 15 does not define; whether the $350,000 tier applies to a Standard 7(a) loan, on which the SOP's own texts differ; how the debt cap counts a loan on separately appraised real estate; and whether equity covering a price above the valuation sits inside or on top of the Initial Acquisition minimum.
Frequently asked questions
Who can perform a business valuation for an SBA loan?
For an SBA 7(a) business purchase outside ESOP loans, Appendix 15 of SOP 50 10 8.1 names a Qualified Source: an individual regularly paid for business valuations, independent of the loan production function, holding an ASA, CBA, ABV, CVA or BCA credential, with the valuation prepared for the lender.
Is the SBA business valuation threshold $250,000 or $350,000?
$350,000 under SOP 50 10 8.1, measured on the Business Purchase Price, which excludes owner-occupied real estate; $250,000 was SOP 50 10 8's test. At or below it, Appendix 15 lets the lender perform its own valuation unless buyer and seller have a close relationship. The 7(a) Small chapter lists this as a 7(a) Small and SBA Express rule; on a Standard 7(a) loan, confirm with your lender.
Can the buyer or seller provide the business valuation for an SBA loan?
No. Under Appendix 15 of SOP 50 10 8.1, outside ESOP loans, the business valuation must be requested by and prepared for the lender, which may not use one prepared for the Applicant or the seller. Unlike a buyer's own Quality of Earnings report, it has no vendor review route.
What happens if the SBA business valuation is lower than the purchase price?
Under Appendix 15 of SOP 50 10 8.1, the amount paid above the business valuation must be made up by equity, and total debt, including seller debt not on full standby, is limited to the business valuation amount. On a $600,000 Business Purchase Price valued at $520,000, $80,000 must be equity.
Who pays for the business valuation on an SBA 7(a) loan?
Under Appendix 15 of SOP 50 10 8.1, the lender may pass the out-of-pocket costs of financial due diligence reports, including the business valuation, on to the borrower. Funds the Applicant spends on the report can count toward the equity injection, a sentence new in SOP 50 10 8.1.
This page summarizes the sources above as retrieved on 30 October 2026. It is general information, not legal, lending, tax or valuation advice, and nothing we prepare is a business valuation for SBA or any lender's purposes. Confirm your transaction with your lender, attorney and CPA before you sign.