What is included in the proposed purchase?
List business and property components separately. Identify seller entities, land, buildings, equipment, intangible assets, working capital, and continuing leases or duties. A combined price does not show how each part was valued or funded. Define what buyer receives before modeling the total purchase.
The buying hub and acquisition roadmap give the broader sequence. Property adds work; it does not replace earnings review. Buyer needs proof that both operation and site fit planned use. A property appraisal cannot settle the quality of the plumbing company's earnings or staff plan.
Must buyer purchase property, may it lease, or can it choose either? Each option changes cost, funds, control, and risk. Record proposed terms. Seller ownership does not prove building is included. A lease option also needs actual rights and costs before comparison with a combined acquisition.
Why should business and property values be separated?
Business earnings depend on services, staff, customers, and work that can continue. Property value depends on site, rights, condition, permitted uses, market evidence, and other appraisal factors. The two reviews answer different questions. A sound operation may occupy a site with separate issues that affect buyer's decision.
SBA SOP 50 10 8.1 requires separate business valuation and commercial-property appraisal under covered acquisition rules. Specified financial checks use defined Business Purchase Price. Remove appraised owner-occupied property from that measure. Buyer equity does not reduce it. Ask lender to show the calculation rather than use combined headline price.
How should rent be reconciled without counting it twice?
Start with stand-alone business earnings and supported occupancy expense. Seller-owned sites may charge high, low, or no internal rent. Check arrangement and support a normalized assumption. Keep market-based rent, actual rent, and modeled changes distinct so a later reviewer knows which view each figure serves.
Next build the combined business/property view. Eliminate internal rent once. Include property taxes, coverage, upkeep, and other continuing costs. Keep financing debt service visible separately. Rent removed from one statement does not eliminate costs of owning the site or prove all resulting earnings are spendable cash.
Suppose hypothetical business earnings are $200,000 after $60,000 internal annual rent. Property earns $60,000 rent and pays $20,000 operating costs, leaving $40,000. Combined earnings before financing are $240,000: $200,000 plus $40,000. These invented inputs teach reconciliation; they are not actual company results, market rent, or property value.
The math counts rent once. Adding both $60,000 gross rent and $40,000 net property earnings duplicates it. Check how the underlying records link before using either sum. A stand-alone buyer leasing the site needs a different occupancy view from a buyer acquiring both business and property.
The profit-and-loss guide supports accounting review. Label stand-alone value assumptions and combined cash-flow assumptions so readers can reconcile each figure.
What should the property diligence schedule cover?
Review title, liens, boundaries, easements, access, permitted use, occupancy, leases, condition, utilities, storage, and environmental issues as relevant. Confirm actual shop and yard use fits the intended operation. Current seller use is evidence to review, not automatic proof of buyer's rights or permission to use it the same way. This table organizes review; it does not find actual defects.
| Workstream | Evidence to review | Acquisition question |
|---|---|---|
| Ownership and title | Title records and applicable liens | Can the required property rights be conveyed? |
| Access and boundaries | Survey, easements, and access rights | Can vehicles and operations use the site as planned? |
| Permitted use | Zoning and relevant approvals | Are shop, yard, storage, and other activities allowed? |
| Condition | Scoped inspections and repair evidence | What work and cash are required? |
| Occupancy and leases | Actual users and written terms | Does the arrangement fit the buyer and lender? |
| Environmental | Required assessment and follow-up | What liabilities or conditions remain unresolved? |
| Ongoing costs | Taxes, coverage, utilities, and maintenance | What cash spending continues after closing? |
What does environmental review actually establish?
EPA's All Appropriate Inquiries guidance describes assessment supporting specified CERCLA liability defenses under its conditions. It does not certify clean or risk-free property. Nor does every buyer satisfy all duties by ordering a report. Have specialists check what the actual inquiry and remaining steps establish for this purchase.
SBA collateral policy separately addresses environmental investigation. Type and depth depend on risk. Ask lender what this site needs. Its requested report and buyer's liability review may answer related but different questions. Meeting a document request does not necessarily settle all risks, report findings, or obligations of the purchaser.
Review date, scope, issues, limits, and follow-up with suitable professionals. Include unresolved investigation and cleanup conditions in the decision file. Report existence does not prove recommended actions are complete. Track who handles the next step, its evidence, and any effect on price, funds, use, or closing.
How does current acquisition amortization work?
Current Appendix 15 allows separate business/property loans or weighted blended amortization for covered acquisitions with real estate. Only property portion can exceed ten years, up to twenty-five. Other uses, including soft costs and working capital, receive ten years in that calculation. Those rules apply to actual eligible project uses.
Weighting occurs before equity and rounds to nearest full year. A hypothetical mix is 40% eligible property at 25 years and 60% other uses at ten years. The math is 0.40 × 25 + 0.60 × 10 = sixteen years. This teaches arithmetic; it is no approval.
The generic 51%-of-proceeds real-estate option for twenty-five-year maturity expressly does not govern ownership changes. Have lender apply acquisition rules to the actual allocation. A building share or weighted example does not by itself establish approved amortization. Keep the lender's real findings distinct from the illustrative calculation.
The SBA acquisition guide covers other conditions. Coordinate term, equity, repayment, collateral, diligence, and seller roles before relying on modeled payments.
What limits apply to 504 or special-purpose treatment?
SBA's 504 overview describes specified fixed-asset uses and exclusions. Discuss actual project with lender and certified development company if relevant. Acquisition provisions do not allow 504 on a blended basis. Different uses and program requirements need their own review rather than one assumed interchangeable financing option.
The agency's cumulative-capacity announcement concerns coordinated 7(a) and 504 exposure. It is not a single $10 million 7(a) acquisition loan. Ask which limits and conditions apply to the actual loans and affiliates. Available program capacity is also separate from approval of buyer's project and repayment plan.
Appendix 15's special-purpose exception requires at least 85% of total project costs for real estate. It also requires stated inseparability and integral-operation conditions. Shop, yard, or warehouse is not automatically special-purpose because a plumber uses it. Obtain lender review of exact facts before relying on the exception.
How should purchase allocation be handled?
IRS Form 8594 instructions address allocation and reporting for covered asset purchases. IRS business-sale guidance describes asset and structure effects. Apply the actual rules with tax advisers. A combined price alone cannot show basis, allocation, reporting duties, or after-tax proceeds for either party.
Coordinate agreed allocation, valuation, and appraisal with tax advisers. Identify land, building, equipment, and intangible parts where relevant. Reconcile totals across records. Tax results depend on completed terms. A broad property line does not settle how price is assigned among assets with different treatment.
Allocation proves neither fair market value nor condition. Support each review and reconcile price. Save approved versions for lender, advisers, and closing team. Update connected records when terms change.
What should the buyer verify before committing?
- Define included business assets, property rights, obligations, and alternative lease terms.
- Obtain separate valuation and appraisal support.
- Reconcile occupancy expense and combined cash flow without duplicating internal rent.
- Complete scoped title, use, condition, occupancy, and environmental review.
- Have the lender model the applicable financing structure and project uses.
- Reconcile allocation, required cash, remaining conditions, and closing documents.
The diligence guide tracks reviewers and open findings. Support and connect both business and property cases. Site ownership can help a transaction, but alone proves neither value, funding eligibility, nor a workable operation. Decide using actual rights, costs, approvals, evidence, and funds rather than the appeal of owning a building.