How to value of a business on a personal financial statement?

2 Replies

Hi Everyone!

Could you please tell me how I would value a business for a personal financial statement that I would be submitting to a bank for a commercial property loan? 

I own a photography studio.  I lease the space in a shopping strip plaza.  All the equipment in the business I own free and clear.  Common sense tells me to add up the value of the equipment.  But what figure should I use?  Purchase price, cost of replacement, or what its worth now - used? 

What about goodwill or the income or potential income in the years to come? 

This is my job full-time.  Not only do I get a w-2, I also get a K-1 at years end.

I would ask my CPA but I don't have one. And I doubt that I could find one to see me this weekend. (I'm submitting my financial statement on Monday).  

Please help.  Thank you in advance?

Call a business broker @Diem Tran  and see if he would bother listing it and how it is appraised. Different types of businesses are valued primarily on a multiple of the annual income with consideration for the property involved. As far as the bank caring about the value; don't think it will play any role. The banks are looking for sustainable income with a history of income. Commercial lenders will want a sizable down and have tougher terms than you might be used to. Some commercial lenders will want to see a net worth equal to the loan amount.

are you applying for a loan then use cost of replacement, the highest price

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