Glossary · Reading the business
Historical cost
In short
An accounting principle that assets are recorded at their original purchase price. This value isn't adjusted for inflation or market value changes.
What it means in a deal
While assets are listed at historical cost on the balance sheet, their fair market value for collateral purposes might be different. During due diligence, understand that inventory, equipment, and real estate are often valued at historical cost, which may not reflect current market worth or liquidation value.
Related terms
Common questions about Historical cost
- Can closing costs such as legal and accounting fees be included in the total project cost for the 10% calculation?
- What factors primarily influence the premium cost of business life insurance?
- How does the SBA evaluate the financial strength of a business with inconsistent historical profitability for an acquisition loan?
- Can I get an SBA 7(a) loan if the business I'm buying has poor historical cash flow?
- Can an SBA 7(a) loan cover the cost of inventory for a business?
- What if the business I'm acquiring has poor historical cash flow or declining revenues for the last two years?
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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