Business Valuation or Banking Valuation?

February 06, 2026

by an intermediary from Southern New Hampshire University in Boston Metropolitan Area, USA

Hi Searchfund Community: I'd like to get thoughts on how Sellers should go about getting a value for their business. Do you recommend that a Seller speak/meet with their Commercial Banker and start with what they would lend a "would-be" buyer, so as to get a sense of what that aspect of the deal structure would provide in acquisition "loanable funds"? Of course, we recognize that additional factors could include down payment, seller financing, and other debt instruments. Thoughts? Many thanks!

Reply by a professional
from Bishop's University in Moncton, NB, Canada

This reminds me of a trick I used to do as a business broker. When a seller would tell me they wanted far more for the business that it was worth, I'd tell them to take their financial statements, black out their name and then meet with their banker. Tell the banker they were going to pay X for the business and ask how much the bank would lend them. It was often a 'come to Jesus' moment for them.

Reply by an intermediary
from The University of Michigan in Minneapolis, MN, USA

I don't believe Commercial Bankers are in the best position to value businesses based on the market approach. They will outsource the business valuations to their trusted partners, and this will do an appraisal based on a specific purpose. So, a valuation for "loanable funds" might be below what a fair market value would be. I'm biased, but a good business intermediary is better positioned to provide you with a value range analysis.

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