Business appraisal: how it differs from a valuation, a calculation and a broker opinion
Short answer
In everyday use, "business appraisal" and "business valuation" mean the same thing: a credentialed professional's opinion of value. The real distinctions are scope and author. A full valuation reaches a conclusion of value; a calculation engagement applies agreed procedures and gives a calculated value; a broker opinion of value is a marketing estimate from someone paid on the sale. SBA lenders need a Qualified Source's conclusion of value prepared for the lender.
| Valuation / appraisal | Calculation | Broker opinion of value | |
|---|---|---|---|
| Prepared by | Credentialed analyst | Credentialed analyst | Business broker |
| Result | Conclusion of value | Calculated value | Suggested asking price |
| Scope | Analyst decides what's needed | Agreed procedures | Market comparisons, quick |
| Independence | Required | Required | Paid on sale |
| SBA lender use | Yes, if Qualified Source and prepared for lender | Not as the required valuation | No |
A quick way to tell which document you're holding: look for the words "conclusion of value", the signer's credential and a signed certification. A full valuation has all three. A calculation will say "calculated value" and describe agreed procedures. A broker opinion usually has none of them and often recommends a listing price range instead of a single value.
What each document is built on
The differences in the table come from how much work sits behind each number. A broker opinion of value is usually built from the seller's figures and recent listings or sales the broker knows about; its job is to set an asking price that will attract buyers. A calculation engagement applies procedures the analyst and client agree, for example a capitalization of earnings on the reported figures, without the full investigation a valuation requires. A full valuation engagement leaves the analyst free to decide what work is needed: normalizing earnings, interviewing management, testing the figures against tax returns, considering each approach and reconciling them into a single conclusion of value.
Standards the professionals follow
Credentialed business appraisers work under professional standards. The AICPA's valuation standard for its members distinguishes valuation engagements (with a conclusion of value) from calculation engagements (with a calculated value). USPAP, which American Society of Appraisers members must follow, has standards for developing and reporting business appraisals. Brokers aren't bound by either when they give an opinion of value for a listing, which is one reason lenders don't rely on those opinions.
Who pays for which, and who can rely on it
| Document | Usually paid by | Who can rely on it |
|---|---|---|
| Broker opinion of value | Often free, as part of winning the listing | The seller, for pricing a listing |
| Calculation engagement | Whoever engages the analyst | The client, for the agreed purpose |
| Full valuation for an SBA loan | Often the borrower, through the lender | The lender (named as client) |
| Full valuation for tax or court | The taxpayer or party | The client, the IRS or court as intended users |
Reliance matters because a valuation answers a specific question for a specific client. Using one outside its stated purpose, for example a seller's estate-planning valuation to support a sale price, usually means relying on assumptions that don't fit the new question.
Reading an appraisal you didn't order
Buyers are often handed a seller's appraisal or a broker's opinion during marketing. It's useful context, but read it with three questions in mind:
- Who was the client? A report prepared for the seller answers the seller's question.
- What was the scope? A calculation or broker opinion hasn't tested the figures.
- What earnings did it use? Compare its earnings to the tax returns; most gaps are add-backs, and those are where buyers and lenders disagree with sellers.
For an SBA loan, none of these replace the lender's own valuation, which must be requested by and prepared for the lender.
When each makes sense
- Broker opinion: a seller deciding whether and how to list.
- Calculation: early planning, internal decisions, some partner discussions.
- Full valuation: lending, tax filings, disputes, ESOPs, anything a third party will rely on.
Next: what an SBA valuation report contains.
If you're a lender reviewing any of these documents, the question is always the same: could this support the loan if it were examined after a default? Only a full valuation by an independent Qualified Source, prepared for you, gets a clear yes.
What an appraisal costs, and why
The cost of a business appraisal depends mostly on scope (a calculation or a full conclusion of value), the size and complexity of the business, the state of its records, the purpose of the report and how fast you need it. We don't publish a price range here because published ranges vary widely and rarely match a specific deal. On an SBA 7(a) acquisition the lender orders the valuation, and SBA lets the lender pass the cost to the borrower.
Everyone asks for a number first. The honest answer is that the fee follows the work, and the work follows six things you can see before you ask for a quote.
The six cost drivers
| Driver | Pushes cost down | Pushes cost up |
|---|---|---|
| Scope | Calculation, agreed procedures | Full conclusion of value, litigation support |
| Size and structure | One location, one entity | Several entities, locations or business lines |
| Records | Accountant-prepared statements tie to tax returns | Cash-heavy, mixed personal spending, missing months |
| Assets | Mostly goodwill, simple equipment | Real estate, specialized equipment, inventory counts |
| Purpose | Internal planning | Lender, tax, court or audit use |
| Deadline | Normal queue | Rush |
How to get a fair quote
- Write down the purpose, the valuation date and exactly what is being sold (assets or stock, real estate in or out).
- Send three years of tax returns, financial statements and a current interim.
- Ask for a flat fee for the defined scope and what triggers extra charges.
- Confirm credentials (ASA, CBA, ABV, CVA or BCA for SBA work) and independence.
Why the same business can draw very different quotes
Two appraisers quoting on the same company are often quoting on different jobs. One assumes the books are clean and plans a desk review; the other expects to rebuild three years of earnings from bank statements. One plans a full valuation engagement with a conclusion of value; the other a calculation. One includes a site visit and a management interview; the other doesn't. Before comparing numbers, put the quotes side by side on these five lines: engagement type, periods analysed, whether a site visit is included, what happens if records are incomplete, and how many rounds of questions from the lender are covered.
Costs that sit outside the appraisal fee
On an acquisition, the business valuation is rarely the only third-party report. Budget for each one separately, because each is ordered and priced separately.
| Report | When it's needed on an SBA deal |
|---|---|
| Business valuation | Every change of ownership (lender may do its own at a Business Purchase Price of $350,000 or less, absent a close relationship) |
| Quality of Earnings | Initial Acquisitions and Business Expansions at a Business Purchase Price of $3 million or more |
| Real estate appraisal | When commercial real estate is part of the deal or collateral |
| Equipment appraisal | When the lender wants orderly liquidation values for collateral credit |
| Environmental review | When real estate is collateral, per the lender's environmental policy |
Ways to keep the cost down without cutting corners
- Send a complete package at the start: returns, statements, interim, add-back support, lease, purchase agreement.
- Agree the scope in writing before work starts, so it doesn't grow mid-engagement.
- Name one seller contact who can answer questions within a day.
- Avoid changing the deal structure after the valuation starts; a switch from stock to asset purchase changes what's being valued.
- On $3 million-plus deals, run the QoE and valuation together so the valuer uses verified earnings the first time.
On an SBA deal
The lender must order the valuation; SBA says the lender may not use one prepared for the buyer or seller. If the Business Purchase Price is $350,000 or less and there's no close relationship between buyer and seller, the lender may do its own valuation. See SBA business valuation rules and how long it takes.
Tell us about the deal and we'll reply with pricing and timing within one business day.
Common questions
Is a broker opinion of value enough for an SBA loan?
No. The broker isn't independent of the sale, and SBA requires a Qualified Source valuation prepared for the lender (with a lender-performed option at $350,000 or less absent a close relationship).
What's a calculation engagement?
A limited-scope engagement where the analyst and client agree on procedures; the result is a calculated value, not a full conclusion.
Are appraisers licensed like real estate appraisers?
Business appraisers are generally credentialed by professional bodies rather than state-licensed. Real estate appraisers are state-licensed or certified.
How long does a full business appraisal take?
It depends mostly on how quickly complete records and answers arrive. See our guide on valuation timelines for the drivers.
Who pays for the SBA business valuation?
The lender orders it, and the cost is commonly passed to the borrower, often financed in the loan or paid at application. Ask your lender how they handle it.
Related guides
Sources
This guide explains rules and practice in plain English. It isn't legal, tax or credit advice, and SBA and IRS rules change. Check the current SOP, regulations and your lender's requirements before you rely on anything here. Examples with made-up businesses are illustrations, not real deals.