# Goodwill

The part of a price paid above the hard assets, for the earnings.

SBA lending finances it where a conventional bank often will not, which is why so many acquisitions run through the [7(a)](https://searchspheresource.com/glossary/sba-7a) program in the first place. It also explains the [collateral shortfall](https://searchspheresource.com/glossary/collateral-shortfall) on most service-business deals, since a lender holding mostly intangible value leans on cash flow and a [personal guarantee](https://searchspheresource.com/glossary/personal-guarantee) instead. In an [asset purchase](https://searchspheresource.com/glossary/asset-vs-stock-sale) the amount booked here is written off against taxable income over fifteen years, so how the price is allocated between it and the hard assets is worth real money to both sides.

In numbers: A $4M business with $600k of equipment and inventory carries $3.4M of goodwill: the price is 85% for the earnings and relationships, which is exactly the part a conventional asset-based lender will not touch and the 7(a) will.

Source: https://searchspheresource.com/glossary/goodwill
Not dated: A definition is editorial: what a term means, why it matters, and an example. None of it reads a source that can go stale, so there is no date to take and a stamped one would be the build time wearing a costume.

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