What Do Lenders Look for in a Valuation?

Lenders look for valuations that are credible, well-supported, and compliant with lending standards—especially when the loan involves a business acquisition, refinancing, or use of business assets as collateral. A valuation that meets these criteria gives lenders confidence in your ability to repay and the security of their investment.

Why This Question Matters

If you're seeking a business loan—particularly through an SBA program or a bank-backed acquisition—your valuation isn’t just a formality. It’s a core part of the underwriting process. An incomplete or overly optimistic valuation can result in:

• Loan denial

• Reduced funding amounts

• Delays in approval

• Increased scrutiny of your business financials

Understanding what lenders expect can help you prepare stronger documentation and improve your odds of success.

Related Questions Clients Often Ask

• Do I need a certified appraiser to do the valuation?

• How current does the valuation need to be?

• Can I use an online calculator or internal estimate?

• What documents will I need to support my valuation?

• How does a valuation affect my loan terms?

What Lenders Actually Look For in a Business Valuation

Here’s a simple checklist of what lenders typically expect:

✅ Third-Party Objectivity

• The valuation must be performed by a qualified and independent professional, such as a Certified Valuation Analyst (CVA) or Accredited Senior Appraiser (ASA).

• For SBA loans over $250,000, this is a requirement (SBA.gov).

✅ Standard Valuation Approaches

• Lenders expect the use of established valuation methods:

  
  

  • Market approach

  • Income approach (e.g., DCF, capitalization)

  • Asset-based approach, where appropriate

✅ Clear, Supported Assumptions

• All projections, adjustments, and assumptions should be well-documented and justifiable.

• Valuators should include explanations for risk factors, growth rates, owner compensation adjustments, etc.

✅ Normalized Financials

• Lenders look for financial statements adjusted for:

  
  

  • Owner perks or personal expenses

  • One-time events (e.g., COVID relief funding)

  • Market-rate salaries and discretionary spending

✅ Consistency With Loan Purpose

• The valuation should align with the deal structure and type of loan (e.g., SBA 7(a), 504, equipment financing).

• For acquisition loans, lenders check that the purchase price does not exceed the appraised value.

Tips for a Lender-Ready Valuation

• Choose the right valuation provider – Look for credentialed professionals with experience in SBA and lender-facing valuations.

• Provide complete documentation – Include tax returns, interim financials, and business plans where applicable.

• Get the valuation early – Don’t wait until underwriting is nearly complete. Valuations can take 1–3 weeks to prepare.

• Ask your lender for guidelines – Some banks or SBA lenders have specific formatting or inclusion requirements.

Final Thought

Your valuation can make or break your financing opportunity. It’s not just about proving your business’s worth—it’s about building lender confidence in your ability to repay and succeed.

Learn more about how we prepare SBA-compliant, lender-ready reports designed to move your loan application forward by checking out our other Blog posts.