Choosing the right lender can save you from the hassle of dealing with a business valuation during the loan approval process. The likelihood of a business valuation being conducted by the bank depends on factors such as your business turnover and the loan amount. 

Business Valuation Guide: For businesses without physical assets, banks rely on the financial information provided for valuation. Keeping your financials up-to-date can aid in this process. 

Avoiding Business Valuation: Can you avoid a business valuation? Generally, small businesses with turnovers below $1 million, like cafes or retail stores, are exempt. However, for specialized businesses such as pubs or child care centers, valuations are almost always mandatory due to their susceptibility to market fluctuations. 

Factors Affecting Valuation: The valuation considers industry conditions, location, and potential fluctuations. The bank may adjust your Loan to Value Ratio (LVR) based on industry and location factors. 

Building a Strong Case: For those buying a commercial property to lease, we can assist in presenting a strong case to avoid a valuation. 

When Valuation Occurs: Understanding when a valuation occurs is crucial. Once you submit your recent financials, the bank will decide whether to proceed. If yes, they engage a specialized valuer to assess the business. 

Bank Valuation Methods: Banks employ four main valuation methods, often in combination: asset valuation, cap rate, earnings multiple, and comparable sales. The valuer considers factors like outstanding debts, client contracts, suppliers, remaining lease years, and a SWOT analysis during the process. 

Additional Considerations: Banks factor in outstanding debts, client contracts, supplier details, lease remaining, and a SWOT analysis in the valuation process. 

Valuing Freehold Property: For those purchasing the freehold property along with the business, the valuation is split between the property and business components. Valuers inspect the building’s suitability and ensure equipment is in working order. 

Valuation Costs:  Usually borne by the borrower, ranges from $2,000 to $3,000. Specialized property valuations, like for a mechanical workshop or pub, can cost up to $10,000 to $20,000, and this cost is typically added to the approved business loan.