Glossary · Reading the business
Fair market rent(Market rent)
In short
This is the going rate for similar commercial properties in the area. When buying a business that leases from a seller-owned entity, ensure the rent isn't artificially low or high.
What it means in a deal
If the seller's operating business leases from a related real estate entity, the rent must be at "fair market" rates. Artificially low rent inflates the business's profitability, while high rent might be a disguised distribution. Your lender will verify this to ensure the business's true cash flow can support the new debt.
Official sources
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 rent
- 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.
Pressure-test the numbers before you make an offer
Send us the asking price and the seller's cash flow — we'll show whether the deal services SBA debt and where the add-backs are likely to hold up.
Free · No documents · Usually same-day
Backed by data on 1,000+ SBA lenders and 300,000+ funded deals. Your details go only to lending partners you ask to be matched with — never sold to advertisers.