Glossary · Reading the business
Fair Market Wage(Market rate salary)
In short
This is the typical compensation paid for a specific job in a particular market, reflecting what a similar position would earn.
What it means in a deal
When underwriting an acquisition, lenders will "normalize" owner compensation to a fair market wage if the current owner's salary is unusually low or high. This adjustment impacts the SDE and EBITDA, which directly affects the business valuation and your repayment capacity.
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 Wage
- 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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