Market value is the price an asset would sell for in a current, arm's-length transaction between a willing buyer and willing seller. It is determined by appraisal, market comparables, or actual transactions.
Market value reflects current economic reality — what someone will actually pay for an asset today. It incorporates supply and demand, asset condition, comparable sales, income potential, and market-specific factors. Unlike book value (accounting history) or replacement cost (what it costs to recreate), market value is grounded in observable market evidence. For real estate, market value is established by licensed appraisers using the sales comparison approach (comparable recent sales), the income approach (capitalized NOI for income-producing property), and the cost approach (land value plus depreciated replacement cost of improvements). Most commercial lenders require a FIRREA-compliant appraisal. For equipment, market value is determined by equipment appraisers referencing auction results (e.g., IronPlanet, Ritchie Bros. for heavy equipment), dealer price guides, and condition assessments. Specialized equipment in niche markets may have very thin comparables. For business interests, market value is estimated using income-based methods (discounted cash flow, capitalized earnings), market-based methods (comparable company multiples), or asset-based methods. Business valuations are required for SBA change-of-ownership transactions and certain SBA 7(a) loan scenarios.
They are often used interchangeably — an appraisal is the formal process of estimating market value. Technically, an appraiser's 'opinion of market value' is their professional estimate, which may differ slightly from an actual transaction price. For lending purposes, 'appraised value' is the number that drives collateral analysis.
Rarely, and usually only coincidentally. For assets early in their useful life with standard depreciation, values may be close. For assets in volatile markets, rapidly depreciating technology, or appreciating real estate, the gap can be large. Lenders don't rely on this coincidence.
The SBA requires a business valuation by a qualified source when an SBA 7(a) loan finances a change of ownership and the purchase price is $250,000 or more, or when there is a close relationship between buyer and seller. SBA SOP 50 10 governs. For qualifying transactions, the valuation must be performed by an independent qualified appraiser.