Why Intangible Assets Matter More Than Ever in SBA Acquisitions
When most people think about buying a business, they picture tangible assets: equipment, inventory, real estate, vehicles. But in today’s economy, the most valuable assets in most small businesses are things you can’t touch — brand reputation, customer relationships, proprietary processes, and intellectual property.
Understanding how intangible assets are valued — and how SBA lenders evaluate them — is critical for anyone looking to acquire a business. Get this wrong, and you’ll either overpay for a business or struggle to get financing for a deal that’s actually worth the asking price.
At GoSBA Loans, we’ve helped close over 126 SBA acquisition deals totaling more than $320 million in 2025 funding. Many of these deals involved businesses where intangible assets represented the majority of the purchase price. Here’s what you need to know.
What Are Intangible Assets?
Intangible assets are non-physical assets that contribute to a business’s value and earning capacity. In the context of a business acquisition, the most common intangible assets include:
Goodwill
Goodwill is the catch-all category for value that exceeds the fair market value of identifiable tangible and intangible assets. It represents:
- The business’s reputation in the community
- Customer loyalty and repeat business patterns
- Favorable location and market position
- Assembled workforce with specialized skills
- Going-concern value — the premium paid for a business that’s already operating vs. starting from scratch
In most SBA acquisitions, goodwill is the single largest asset category. It’s not uncommon for goodwill to represent 50-80% of the total purchase price.
Brand and Reputation
A business’s brand extends beyond its logo and website. It encompasses:
- Name recognition in the local market or industry
- Online reviews and ratings (Google, Yelp, industry-specific platforms)
- Referral networks and word-of-mouth reputation
- Positioning relative to competitors
- Trust built over years of consistent service delivery
Customer Lists and Relationships
An established customer base is one of the most valuable assets in any business:
- Recurring revenue customers: Subscription or contract-based relationships with predictable revenue
- Customer concentration data: Understanding who the top customers are and how much revenue they represent
- Customer acquisition cost (CAC): The cost of replacing customers if they were lost
- Lifetime customer value (LTV): The total revenue a customer generates over the relationship
- Retention rates: How long customers stay and what percentage return year over year
Proprietary Processes and Trade Secrets
Many small businesses have developed unique ways of doing things that give them a competitive advantage:
- Manufacturing processes or formulas
- Service delivery methodologies
- Operational systems and workflows
- Supplier relationships and preferred pricing
- Training programs and organizational knowledge
Intellectual Property (IP)
Formal intellectual property includes:
- Patents: Protected inventions or innovations
- Trademarks: Protected names, logos, and brand identifiers
- Copyrights: Protected creative works, software, and content
- Trade secrets: Confidential information that provides a competitive edge
- Licenses: Rights to use technology, content, or processes
How SBA Lenders Value Intangible Assets vs. Hard Assets
SBA lenders have a complex relationship with intangible assets. On one hand, they understand that modern businesses derive most of their value from intangibles. On the other hand, intangible assets are harder to value, harder to collateralize, and more susceptible to deterioration during an ownership transition.
The Lender’s Perspective
When evaluating an acquisition loan, SBA lenders consider:
- Cash flow first: Above all else, lenders care about whether the business generates enough cash flow to service the debt. The debt service coverage ratio (DSCR) — typically required to be 1.25x or higher — is the primary underwriting metric.
- Asset coverage second: Lenders prefer deals where tangible assets provide meaningful collateral. A business with $500K in equipment offers more security than a consulting firm with $500K in goodwill.
- Goodwill tolerance: SBA lenders generally accept higher goodwill percentages than conventional lenders, but extremely high goodwill deals (80%+ of purchase price) receive extra scrutiny.
- Third-party validation: Lenders often require independent business valuations, especially for deals with significant intangible asset components.
How Different Asset Types Affect Your Loan
- Real estate: Provides the strongest collateral; may allow lower rates or better terms
- Equipment: Provides moderate collateral; valued at fair market or orderly liquidation value
- Inventory: Provides some collateral; valued conservatively (often at 50% of cost)
- Goodwill and intangibles: Minimal collateral value; lenders rely on cash flow coverage instead
This doesn’t mean intangible-heavy businesses can’t get SBA financing — they absolutely can. It means the underwriting approach is different, with more emphasis on cash flow sustainability, buyer qualifications, and deal structure.
Why Service Businesses Are Mostly Intangible — And How to Finance Them
Service businesses present a unique challenge in SBA lending because their value is almost entirely intangible. Consider these common acquisition targets:
- Accounting and bookkeeping firms: Value = client relationships, recurring revenue, professional reputation
- Marketing agencies: Value = client contracts, team expertise, creative portfolio
- IT services companies: Value = managed services contracts, technical expertise, vendor partnerships
- Home services companies: Value = brand reputation, customer lists, trained technicians, online reviews
- Consulting firms: Value = client relationships, methodology, team expertise
- Healthcare practices: Value = patient base, provider reputation, referral networks
In each case, you’re buying the right to step into an established revenue stream powered by relationships and reputation — not by hard assets.
Keys to Financing Intangible-Heavy Acquisitions
- Strong historical cash flow: 3+ years of consistent, growing revenue and profitability is the strongest argument for an intangible-heavy deal
- Customer diversification: No single customer representing more than 10-15% of revenue
- Recurring revenue: Contracts, subscriptions, or repeat purchase patterns reduce risk
- Buyer qualifications: Industry experience, management skills, and adequate equity injection
- Seller transition support: A meaningful transition period where the seller helps transfer relationships
- Seller financing: A seller note (typically 10-20%) demonstrates the seller’s confidence in the business’s continued success
At GoSBA, we work with 50+ lenders specifically because different lenders have different appetites for intangible-heavy deals. Some lenders specialize in service business acquisitions and are very comfortable with high goodwill percentages. Matching your deal with the right lender is often the difference between approval and denial.
Third-Party Valuations: What They Are and What Lenders Accept
For most SBA acquisitions above $250,000, lenders will require a third-party business valuation. Understanding this process helps you prepare and avoid surprises.
Types of Valuations
- Broker’s Opinion of Value (BOV): A less formal assessment, often provided by the business broker. Generally not accepted as the sole valuation by SBA lenders for larger deals.
- Business Valuation Report: A formal analysis prepared by a qualified business appraiser (often holding credentials like ASA, CVA, or ABV). This is what most SBA lenders require.
- Rule-of-thumb valuations: Industry-specific multiples (e.g., “accounting firms sell for 1-1.5x revenue”). Useful as benchmarks but not sufficient as standalone valuations for lending purposes.
Common Valuation Methods
Business appraisers typically use multiple methods and reconcile them:
- Income Approach (Discounted Cash Flow): Projects future cash flows and discounts them to present value. Most relevant for profitable, stable businesses.
- Market Approach (Comparable Transactions): Compares the subject business to similar businesses that have sold recently. Limited by data availability for small businesses.
- Asset Approach: Values the business based on the fair market value of its assets minus liabilities. Most relevant for asset-heavy businesses; often understates value for service companies.
What Lenders Want to See
- The valuation supports a purchase price within a reasonable range (typically within 10-15% of the appraised value)
- The appraiser is qualified and independent (no conflict of interest)
- The valuation methodology is appropriate for the type of business
- Key assumptions are clearly stated and defensible
- The valuation addresses the specific intangible assets being acquired
How to Justify a Premium for Strong Intangible Assets
Sometimes a business is worth more than a standard multiple suggests because its intangible assets are exceptionally strong. If you’re willing to pay a premium, you’ll need to justify that premium to your lender. Here’s how:
Document the Intangible Value
- Customer retention data: Show that customers stay for years, not months. High retention = predictable revenue = lower risk.
- Brand strength metrics: Online reviews, Net Promoter Score, market share data, brand recognition surveys
- Revenue quality: Recurring revenue, long-term contracts, diversified customer base
- Proprietary advantages: Patents, exclusive partnerships, unique processes that create barriers to entry
- Growth potential: Untapped markets, new service lines, expansion opportunities that the current owner hasn’t pursued
Show the Replacement Cost
One powerful way to justify intangible asset value is to calculate the cost of building those assets from scratch:
- How much would it cost to acquire the same number of customers through marketing?
- How long would it take to build the same reputation and online review profile?
- What’s the cost of recruiting, hiring, and training a comparable team?
- How many years would it take to develop the same vendor relationships and preferred pricing?
When you frame it this way, what seemed like a premium often looks like a bargain compared to the time and money required to build from zero.
Leverage GoSBA’s Experience
At GoSBA, we’ve structured financing for businesses across the intangible spectrum — from equipment-heavy manufacturing to pure-play service firms with zero hard assets. Our experience helps in several ways:
- We know which lenders are comfortable with intangible-heavy deals — our 50+ lender network means we can match your deal with the right partner
- We help you build a compelling narrative around the value of intangible assets in your specific deal
- We prepare lender-ready projections that demonstrate how the business will service debt — our free business plan and projections (a $2,500-$5,000 value) are specifically designed for this purpose
- We know what questions lenders will ask and help you prepare answers in advance
Common Intangible Asset Pitfalls in SBA Acquisitions
Watch out for these common issues related to intangible assets:
- Key person dependency: If the business’s value is heavily tied to the current owner’s personal relationships, those relationships may not transfer. Structure a longer transition period.
- Customer concentration: If 30%+ of revenue comes from one customer, lenders will be concerned. Have a plan for diversification.
- Unprotected IP: If the business relies on trade secrets, processes, or brand elements that aren’t legally protected, that’s a risk factor.
- Reputation risk: If the business’s reputation is tied to the owner’s name (e.g., “Smith & Associates”), the transition plan needs to address brand continuity.
- Employee retention: If key employees leave after the acquisition, the intangible value they represent leaves with them.
Take the Next Step With GoSBA
Intangible asset valuation doesn’t have to be a mystery — or an obstacle. With the right financing partner, you can structure a deal that properly values the business’s intangible assets while meeting SBA lending requirements.
GoSBA has helped fund over $320 million in SBA loans in 2025 across 126+ deals — many of them intangible-heavy acquisitions. Our service is completely free to borrowers, and includes a complimentary business plan and financial projections worth $2,500-$5,000.
Contact GoSBA today for a free consultation — let us help you understand the true value of the business you’re acquiring and find the right lender to make it happen.
