An independent view of enterprise and equity value for your finance application.

A business valuation for a loan or finance application is an independent opinion of a company's enterprise or equity value, prepared to support a lender's or broker's credit assessment: distinct from the bank's own panel property or security valuation. Lenders commission one when they are lending against business earnings or goodwill rather than only real property: cash-flow or goodwill-backed facilities, refinances, vendor-finance deals, personal-guarantee and covenant testing, and shareholder buy-ins. Oliver Group prepares independent business (going-concern and equity) valuations, not API property security valuations, and takes no referral fee from brokers or accountants, so the report stays independent of whether the loan proceeds.

When a lender or broker wants an independent business valuation

A lender or broker asks for an independent business valuation when the credit decision turns on the value of the business itself, its earnings, goodwill and equity, rather than only the real property offered as security. The common triggers are a cash-flow or goodwill-backed facility (professional practices, agencies, distribution and services businesses where the lending sits against recurring earnings rather than bricks and mortar), a refinance where the lender wants to re-test leverage against enterprise value, a vendor-finance deal where part of the purchase price is deferred and the financier needs the business independently valued, a management buy-in or buy-out funded partly by debt, and a personal-guarantee or covenant assessment where the guarantor and the credit team both want a considered view of the value standing behind the loan. Business lending of this kind is not covered by the National Credit Code, which applies to consumer credit: a subscribing bank's small-business lending is instead governed by the Banking Code of Practice, and the valuation requirement itself comes from the lender's own credit policy. So the scope worth commissioning is the scope your lender or broker will actually accept; confirm that with them before you engage.

A business valuation: not the bank's property or security valuation

When a bank says it needs 'a valuation', it can mean two very different things, and confusing them wastes time and money. A property or security valuation is a market-value opinion on real estate offered as mortgage security, prepared by an API-registered Certified Practising Valuer from the lender's own panel: usually instructed by the bank directly, on a market-value basis, sometimes 'as is' and 'on completion'. Plant and equipment offered as security is valued separately again, by specialist plant and machinery valuers. Oliver Group prepares neither: we are not on lender property panels and we do not provide API property or security valuations. What we prepare is the business valuation: an independent opinion of the enterprise or equity value of the trading business: its maintainable earnings, its goodwill, and the value of the shares or units. The two often sit side by side on one file for different purposes, a bank lending to buy a business that also owns its premises will take its own property valuation for the mortgage and may separately want a business valuation for the going concern, but they answer different questions and are prepared by different disciplines. If what your lender actually needs is the market value of a building, a panel property valuer is the right call, and we will tell you so rather than take the engagement.

Enterprise value, equity value and the covenants your lender tests

Lenders read a business valuation through two figures. Enterprise value is the value of the business's operations independent of how they are financed; equity value is enterprise value less net debt: the owners' stake once borrowings are repaid. A credit team uses enterprise value to size the earnings and asset base the facility sits against, and equity value to see the borrower's contribution and 'skin in the game'. Both feed the covenants a business loan is tested on: the debt-service cover ratio (broadly, maintainable EBITDA measured against interest and scheduled principal, with many lenders looking for headroom above 1.25 times), the interest-cover ratio, and leverage or gearing expressed as net debt to EBITDA or debt to equity. Where real property secures the loan the lender talks about LVR; where the lending sits against the business, the equivalent question is how much debt the enterprise value and its earnings can support. For a personal-guarantee or covenant assessment, an independent valuation gives both the guarantor and the credit team a considered view of the value standing behind the guarantee, rather than a number taken on trust. We prepare the valuation and set out the earnings basis and the equity and enterprise figures; the lender applies its own credit policy and covenant tests to them.

How we value the business, and to what standard

We value a trading business as a going concern, most often by capitalising future maintainable earnings, a normalised EBIT or EBITDA multiplied by a capitalisation multiple drawn from comparable transactions and the specific risk of the business, cross-checked, where a credible forecast exists, against a discounted cash flow and against market multiples. The work that matters is the normalisation: adding back an owner's above-market salary to a commercial rate, removing one-off and non-recurring items, adjusting related-party rent or charges to market, and separating genuinely maintainable earnings from a good or a bad single year. Where the lending is conservative or the credit is marginal, we can also report value on an orderly-realisation basis alongside the going-concern figure, because a lender assessing downside wants to see both. Reports are prepared under the direction of our lead valuer, Jackson Wilson. The same evidentiary discipline underpins the ATO's market-valuation guidance: a credit committee tests a report the way a case officer does: by asking whether the figure can be traced, not merely asserted. Oliver Group prepares the valuation only; we are not a registered tax agent, and any tax consequences of the transaction are for your accountant.

No referral fees: independence your lender can rely on

A business valuation only helps a credit decision if the credit team can treat it as independent: which is precisely why a valuation commissioned through a broker deserves a hard look. Oliver Group neither pays a referral fee or commission to the broker or accountant who refers you, nor accepts one tied to the loan settling. A payment that depends on the deal proceeding is exactly the conflict a credit team screens for, so we keep none of it in the arrangement. Our fee is fixed in writing at engagement, before we see where the numbers land, and it is never contingent on the concluded value or on whether the finance is approved. That is not a discount we are offering: it is the structural independence that lets a lender rely on the report. The valuation is addressed to you and can be provided to your lender or broker; it says what the evidence supports, whether or not that is the number the application would prefer.

Documents, turnaround and fixed fee

A finance-application valuation draws on the trading history and structure of the business, so the report can evidence maintainable earnings and the equity and enterprise position on a basis a credit team can test. Fees are fixed at engagement and never contingent on the concluded value. The records the valuation typically draws on are: Oliver Group's fees are set by the annual turnover of the business: a Small Business Valuation is $1,495 + GST for turnover under $2 million, a Medium Business Valuation is $2,495 + GST for turnover between $2 million and $10 million, and a Large Business Valuation is $3,495 + GST for turnover over $10 million. Small-business reports are delivered in 2 business days and medium-business reports in 3 business days; the delivery date for a Large Business Valuation is agreed before commencement. Delivery time starts once payment and all required information have been received. Retrospective valuation dates are +$495 each and additional entities are +$795 each. The fee is fixed in writing before work begins and never depends on the concluded value.

• ·Financial statements for the last three years
• ·Management accounts to the valuation date
• ·Tax returns and lodged business activity statements
• ·Aged debtors and creditors, stock and work-in-progress detail
• ·Asset register and depreciation schedule
• ·Details of borrowings, leases and related-party loan accounts
• ·Add-back and normalisation detail: owner's remuneration, one-off items, related-party rent
• ·Share or unit register, constitution and any shareholders' or unitholders' agreement
• ·The sale contract, heads of agreement or vendor-finance terms, where a transaction is on foot
• ·Any covenant or valuation scope your lender or broker has specified