Certified business appraisals have traditionally been required by lenders as a pre-condition for final loan approval on larger deals.
In today’s skittish and skeptical financial environment, certified appraisals of both the business as a whole, as well as of its major asset classes such as real estate, machinery, equipment, inventory, and even intellectual property such as patents & trademarks, are becoming more and more essential.
For some SBA guaranteed loans, certified appraisals for the business as a whole, PLUS ALL of its major asset classes MUST be submitted with the original loan application under recently released SBA guidelines.
Keep in mind that these appraisals must be ordered by the lender from their chosen appraiser. In general, the lender will not consider an appraisal ordered by the seller, and most of the time will not even use the same appraiser out off concerns for getting a truly independent appraisal. Unless otherwise negotiated, the cost for these appraisals is usually borne by the buyer.
The net effect of this new emphasis on certified appraisals has clearly increased the time, effort, expense AND uncertainty of getting loans approved and deals closed in today’s environment.
Other than ordering up two complete sets of appraisals — one for the seller to get the business listed at the right price, and another for the lender/buyer to get the loan approved — the best course of action for a business seller or buyer is to work with an experienced M&A advisor who keeps abreast of what businesses and business assets are appraising for and advises his client accordingly.
If you know of a business owner who’s thinking of selling or buying a business and who might benefit from a complimentary, confidential, consultation with us, have them contact me at mertel@legacyadvisorsgroup.com
By: Mike Ertel, Transworld M&A Advisors