Glossary · Reading the business
Formal appraisal
In short
An independent, professional valuation of assets or the business itself by a qualified appraiser. It determines fair market value for financing.
What it means in a deal
For SBA 7(a) loans, a formal business valuation or appraisal is often required, especially for larger loans or when goodwill is a significant asset. The lender will order this, and you'll typically pay for it. The appraisal helps confirm the business's value, justifies the purchase price, and assesses collateral. Pay attention to the valuation methodology and assumptions.
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 Formal appraisal
- Can a lender accept a "soft offer" for collateral in liquidation, or is a formal appraisal always required for disposition?
- Does an SBA 7(a) loan require a formal appraisal for business assets if the purchase price is below $500,000?
- Does the SBA require me to create a formal business plan to apply?
- Do I need a formal business plan to apply for an SBA 7(a) loan?
- What specific due diligence is required for an unlisted franchise agreement lacking SBA formal review?
- Is an independent appraisal always required when an acquisition includes significant goodwill?
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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