WHEN IS THE BEST TIME TO GET A BUSINESS VALUATION?
For several situations discussed above, a business valuation may have to be done as of a specific point in time. However, in planning for the sale of a business, a good rule of thumb is approximately 5 years before the sale date. The sale of a business often means retirement for small business owners and the business owner typically has a large portion of their wealth tied up in the business. Getting an outside perspective on the value of a business is often helpful in developing an exit strategy.
WHAT ARE SOME OTHER REASONS FOR A BUSINESS VALUATION?
A business valuation is a useful tool for business planning. When a business owner understands the value of their business and what drives it, they become likely to make decisions that will improve it. Consultation with a business valuation analyst can also be valuable in developing buyout agreements or other internal planning. Business valuations are also used in divorce matters, shareholder disputes and for tax purposes.
WHICH SMALL BUSINESS ADMINISTRATION LOAN PROGRAM DO I NEED A BUSINESS VALUATION FOR?
If you are acquiring a business for which financing is guaranteed by the Small Business Administration's 7(a) program and the total financing, less the value of appraised real estate, is greater than $250,000, the lender will require a business valuation from a qualified source. If financing is below $250,000 and the sale is between related parties, an appraisal will also be required. Consult your lender for specific guidance on program requirements.
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