Glossary · Reading the business
Cost approach
In short
This valuation method estimates an asset's value by calculating the cost to replace it new, minus depreciation. It's often used for valuing tangible assets like real estate or equipment.
What it means in a deal
You'll encounter the cost approach in appraisal reports when valuing significant tangible assets, such as owner-occupied commercial real estate or specialized equipment. It helps establish a floor value for these assets, complementing income-based valuations for the overall business. Understand how this approach contributes to the total business valuation.
Related terms
Common questions about Cost approach
- What factors primarily influence the premium cost of business life insurance?
- Can an SBA 7(a) loan cover the cost of inventory for a business?
- Can an SBA 7(a) loan cover the cost of a business valuation or appraisal?
- What percentage of the project cost does the SBA typically expect as a down payment?
- Can an SBA 7(a) loan cover the cost of a franchise transfer fee in an acquisition?
- Can an SBA 7(a) loan cover the cost of relocating the acquired business to a new facility?
Defined by CapBench SBA Intelligence — plain-English definitions for business buyers, lenders, advisors, and AI agents, grounded in public SBA rules and records. Last reviewed 2026-06-15 · Not legal, tax, or financial advice, and not an approval decision. Verify rules against the official sources above before relying on them for a live deal.
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