Glossary · Reading the business
Fair Market Lease
In short
This is a lease agreement where the rent and terms are consistent with what similar properties would command in the current market. It reflects a true arm's length transaction.
What it means in a deal
The SBA requires that any lease agreement related to the business, especially if it's with an affiliate of the seller or buyer, be at fair market value. Lenders will scrutinize leases to ensure the rent isn't artificially inflated or deflated, which could impact the business's cash flow for debt service.
Official sources
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 — Lender and Development Company Loan Programs
U.S. Small Business Administration · SBA Standard Operating Procedure
Last checked 2026-06-15. Official sources control — verify before relying on any rule for a live deal.
Related terms
Common questions about Fair Market Lease
- How does a lender determine the fair market value of business equipment used as collateral?
- How does the SBA verify the fair market value of assets contributed as equity injection?
- If a borrower contributes equipment as equity, how does the lender verify its fair market value?
- How does the SBA evaluate the fair market value of goodwill in a business acquisition for financing?
- Can the fair market value of raw materials I contribute to the acquired business count towards equity?
- Can the fair market value of equipment I already own be used as equity for an acquisition?
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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