National Business Valuation
Frequently Asked Questions
What is a Business Valuation?
A business valuation is a professional opinion on the fair market value of a privately held business. A privately held business is not required to disclose internal functions that may have an impact on how the business may operate in the future. This future operation has a large impact on the present and future value of an entity. Therefore, a professional opinion of the business' value is commonly used in aquisitions, transitions, and other transactions.
How do you use a Certified Business Valuation?
A Certified Business Valuation is required to follow a set of standards set and governed by a professional organization such as the National Association of Certified Valuators and Analysts (NACVA). These standards are used in many situations concerning valuation methods including lending, divorce, litigation, and estate planning.
What type of information will you use?
An Opinion of Value as required by the SBA's SOP requires three to five (3-5) years of the most recent corporate tax returns; three to five (3-5) years of the most recent financial statements, including Profit/Loss and Balance Sheets; any and all business related appraisals related to tangible assets of the business; and the current business information including owner(s) names and contact information is required.
What is the difference between a Business Valuation and a Business Appraisal?
Some terms throughout various industries can be used interchangeably. Business valuation is a more common term related to valuing a business entity as it relates to the IRS, legal proceedings, and investments. Business appaisal is a term commonly used by financial institutions and other lending organizations. Although these terms are used differently, the acutal difference between the two is very small.
How is the value calculated?
There are three (3) commonly accepted approaches to valuing a business. These approaches are then divided into methods within each approach to comprise an opinion of value. These approaches include Income Approach, Market Approach, and Asset Approach. How the business is valued is highly dependent on the analyst's opinion on which approach is appropriate relative to the purpose of the business valuation.
Can't you just use a multiple?
Some private investors have been known to use a multiple to determine valuation. This may represent one buyer in the market, and justifying this multiple is at the discretion of that particular buyer or investor. The job of the valuation analyst is to provide a rational explanation of the detemined capitalization rate and what earnings stream to use. The analyst is trying to explain what the market as a whole would use to value the business, rather than just one buyer.
What is a general price range for a business valuation?
Much of the price is determined by each valuation. This is primarily determined by the scope of the business and specific lenders needs. Please contact a CVA for additional details and specific price quote.
Can a CPA give me a value for a business?
The most important thing when considering a business valuation is to fully understand the standards, methods, and approaches being used by the individual performing the business valuation. Ensuring a valuation is following a set of standards comprised by an individual governed by a group of professional practioners in the specific field of valuation is highly important.
Why doesn't the borrower order the business valuation?
Certain governmental guaranteed loan programs, such as the SBA, require a business valuation to be ordered by and prepared for the lender. This is very similar to a mortgage loan, the SBA requires the lender to have a line of separation between the valuation analyst and the client obtaining the loan. This process maintains a level of impartialness in the valuation process resulting in an unbias opinion of value. Using a independent third party to value a business insures the process to be to be fair, reasonable, and accurate.
How much does it cost?
The cost is determined by the scope of the business and specific lender needs concerning delivery. Contact a CVA to obtain a specific price for your situation.
What does a business valuation involve?
In general, the valuation analyst will use any all methods they feel is appropriate in valuing a business. This may include a site visit, key person interviews, an abridgement meeting, industry analysis, and/or policy maker interviews. Although many of the procedures are standarized, the analyst reserves the right to make adjustments according to the complexities of each business.
How long does it take?
We update our average Current Turntimes each quarter of the calendar year. This number represents the average number of business days it takes from the initial sign date to the date it is delivered.
Can lenders require a business valuation on a non SBA loan?
The SBA is very specific in the requirements of a business valuation. We are seasoned in these requirements, but in the event that your loan does not need a government guarantee we can accomodate non SBA loan as well. Depending on the purpose of the business valuation, we can perform business valuations for both SBA and non SBA loans.
Why should we use National Business Valuation?
We are not for every lender. We have a set of standards and we follow them. We want to provide a business valuation that is consistent, comprehensive, and easy to understand. If you would like to work with a business valuation provider that provides a quality valuation report while understanding the needs of their customers, you should consider us.