A Comparative Market Analysis (CMA) is a tool used by real estate agents to value a Business. It evaluates similar Business that have recently sold in the same area. Agents find comparable sales and use them to conduct a sales comparison. In most cases, an agent will find three Business that have recently sold and are as similar to and located as close to the Business being valued as possible. Each one is then analyzed to pinpoint differences between it and the Business being valued. Once these differences are priced out, the price of each comp is adjusted to see what it would cost if it was identical to the Business being valued were it to be sold in the current market.

An appraisal is an unbiased valuation of a Business based on a professional’s opinion. They are usually what mortgage companies use for Business purchases and refinances. A lender usually orders a Business appraisal and the cost of the appraisal, sometimes up to $500, is paid by the homeowner. An appraiser does a complete visual inspection of the interior and exterior of the Business as well as taking into consideration recent sales of similar properties and market trends. The appraiser then compiles a detailed report on the Business, including an exterior building sketch, a street map showing the Business and any comparable sales, photos of the Business and street, an explanation of how the square footage was calculated, and any other relevant information.

Lenders base the amount of their loans on the value of your property and usually allow you to borrow a maximum of 75% to 96.5% against your property. Knowing what your Business is worth allows lenders to calculate your equity in the Business. The more equity you have, the better terms you will receive on your refinance.

If you’re doing Business improvement projects to increase the resale value, you want to make sure you’re not pricing it out of the market. If your Business is already priced on the high-end for your neighborhood, making too many improvements could make it more difficult to sell. When you get a valuation, you can see how your Business compares with others in the neighborhood and let this guide your home improvement decisions.

If you want to borrow cash against your Business, getting a Home Equity Line of Credit (HELOC) could be a good option. To qualify, you must have a certain level of equity in your Business. Most lenders require at least 20%. Getting a Business valuation will help you determine if you qualify and will be used by the lender to make a decision on your loan.

Though it’s not a necessity, simply knowing the value of your Business is good information to have. It will help you plan for the future and deal with unforeseen circumstances when you might be in a position that requires extra money or a quick relocation. Knowing how much equity you have in your Business and how much you may be able to borrow against it or sell it for will help you respond to any financial curveballs that life throws at you.