June 2019
Ask The Experts
SBA 504 Q&A: Appraisal Report Guidelines

Q: What key components of a Small Business Administration (SBA) 504 loan project should an appraisal address prior to submittal to the SBA?

Ask the SBA 504 Loan ExpertsA: In an effort to reduce screen-outs related to appraisals, the SBA’s loan processing center has provided the following guidelines to help Certified Development Companies and their 504 lending partners in compiling the data found in the appraisal and assist in the determination of the adequacy of the appraisal.

A) The following are guidelines for commercial real estate appraisals:

  Number of parcels in the appraisal report matches the number presented in the loan application and any excess parcels have been addressed.
  The SBA is included as a client and/or intended user in the body of the report.
  Valuation method used – minimum of 2 value methods with exception of land only project: sales, income and cost.
  Remaining useful or economic life is discussed and is equal to or greater than the debenture term.
  Occupancy percentage matches the percentage discussed in the credit memo.
  If the project involves a business acquisition, the appraised value is equal to or greater than the project costs in the authorization.
  Appraisal report is not a restricted report.
  Appraiser has signed the report; valid license with current expiration; industry experience.
  Construction costs are not higher in the appraisal than the authorization.
  Appraisal report is not dated over 12 months.
  Ineligible property is not included in the appraisal.

B) The following are guidelines for fixed heavy duty machinery and equipment appraisals:

  The appraiser has performed an on-site inspection of the equipment.
  The remaining useful or economic life is discussed and is equal to or greater than the debenture term (applicable to an equipment only loan).
  If the project involves a business acquisition, the appraised value is equal to or greater than the purchase price in the authorization.
  Appraiser has signed the report.
  Appraisal report is not dated over 12 months.
  Ineligible property is not included in the appraisal.

If you have a question you’d like our SBA 504 loan experts to answer, email us at info@FloridaFirst.com or call 850.681.3601 or toll-free at 800.504.LOAN.