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Going concern
Also called going concern value, going concern qualification.
The accounting assumption that a business will keep operating for the foreseeable future — and, separately, the premium a buyer pays for an operating business over the sum of its assets.
Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.
What it means
Two distinct uses share the phrase, and conflating them causes real confusion in funding files.
The accounting assumption
Financial statements are prepared on the assumption the entity will continue trading. When an accountant has substantial doubt about that — recurring losses, negative working capital, a defaulted loan, a lost anchor customer — they must say so. In an audit or review that appears as a going-concern paragraph or emphasis-of-matter note.
That paragraph is a credit event in slow motion. Bank and SBA underwriters treat it as a disqualifier absent a very specific remedy, and loan covenants frequently make the delivery of financials containing a going-concern qualification an event of default in its own right, independent of whether payments are current.
The valuation sense
Going-concern value is what an assembled, operating business is worth above its liquidation value: trained staff, customer relationships, systems, permits, cash flow. In an SBA-financed acquisition the difference between the purchase price and the appraised tangible assets is largely going-concern value and goodwill, and how much of it a lender will finance is a policy question that varies by lender and programme.
Where this one catches people
A going-concern note is not a comment on the current year's profit. It is a statement about the next twelve months' viability, and it can appear in a year the business made money — if, say, a balloon comes due and no refinancing is arranged. Business owners often ask their accountant to "take the paragraph out". The accountant cannot, and asking puts the accountant in an ethical position that ends the relationship.
Where you will meet this term
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Going concern — common questions
What does going concern mean?
The accounting assumption that a business will keep operating for the foreseeable future — and, separately, the premium a buyer pays for an operating business over the sum of its assets.
Where does going concern catch people out?
A going-concern note is not a comment on the current year's profit. It is a statement about the next twelve months' viability, and it can appear in a year the business made money — if, say, a balloon comes due and no refinancing is arranged. Business owners often ask their accountant to "take the paragraph out". The accountant cannot, and asking puts the accountant in an ethical position that ends the relationship.
Is going concern the same as an interest rate?
Going concern is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.
Which products does going concern apply to?
Term Loan, SBA Loan, Asset-Based Lending.
Is there a worked example of going concern?
Not on this entry. Where a term is arithmetic, the arithmetic is shown; this one is not primarily a calculation.
What else should I read alongside going concern?
Covenant, Default, Financial statements, Goodwill, Liquidation value.
Has this definition been checked?
Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.
Is this legal advice?
No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.
Can I suggest a term?
Yes — [email protected]. The glossary grows from what people are actually shown in contracts.