A recent Time Magazine article reported that many small and community banks are now seeing more demand for loans, which is a positive sign for the economy. According to the article, economists have expressed concern that despite the 3.2% first quarter economic activity growth, there was a lack of business lending activity. Business lending demonstrates business growth, they argue. Businesses in growth mode need financing to purchase equipment and hire staff, and without that there can’t be sustained economic recovery.

As we have discussed in previous posts, banks are lending money, but they are being more cautious about their investments. This means they are conducting more careful due diligence, which includes their own certified equipment appraisals and business valuations to ensure that they will recoup their losses should a loan default. Having a defensible, impartial appraisal in hand can help increase the chances of getting much-needed money for a small business.

By: Present Value

Additional Reading

5 Cs of Lending (How Appraisal Fits in Even Though It Doesn’t Start with C)

Got a Startup? Get a Business Valuation

Present Value: More than an Appraisal Firm

Some of the important takeaways from the article are:

• Keep an open dialogue with those who will be affected by the plan, such as family members and business partners.
• This is a process that lasts as long as the life of a company and it needs to be continuously refined and updated.
• Find people you trust to work with you on planning, including estate planners, attorneys, accountants, insurance providers, and of course business appraisers.

It’s something to think about because no business owner wants their hard work, blood, sweat, and tears to be all for naught. You can take steps now to ensure the future of your company.

By: Present Value

Other posts you might find interesting:

“Five Myths of Business Valuations”

“Adjusting Your Exit Plan”

“Succession Plans”

“Business Valuations and Estate Planning”

We’ve written multiple posts on why it’s important for a business owner to know the value of his or her business. It’s equally important for a potential buyer to understand the value of a business that he or she is considering for purchase and to know what he or she is getting in the deal.

Of course there are many things to take into account when contemplating buying a business, such as your own strengths and weaknesses, your understanding of business fundamentals, and your understanding of the potential market in which the business operates. Obtaining a professional business valuation can help you better understand the ins and outs of a particular business, like a business’s cash flow, the value of its assets and/or equipment, how the company acquires customers, and the market in which it operates.

If you’re thinking about buying an established business, get an appraisal. You need to know what you’re getting into.

By: Present Value

For a startup company, a valuation can be used as a business performance indicator, reflecting the company’s direction. It can help business owners figure out what’s working and what’s not, and where resources should directed or re-directed. A valuation can also give a deeper, more complete understanding about the competitive forces and drivers in the business’s market.

For any company, a business valuation can provide a snapshot of the business within the context of the market and industry in which it operates, in addition to evaluating the health of the market itself. This can help business owners at any level determine if the initial opportunity is still present and/or whether or not an exit from the business and the market is warranted.

It may be a wise decision for startup business owners to incorporate business valuations on a somewhat regular basis to determine if the company is achieving its desired trajectory.

By: Present Value

The article highlights the fact that most business owners have no idea how much their businesses are worth. The writer points out that it is necessary for a business owner to know the value of his or her business in order to set realistic expectations for both the seller and potential buyers. Many sellers may be setting themselves up for disappointment if they don’t understand the potential market price of their business. And if an asking price is too high, it could jeopardize the attractiveness of a business to potential buyers.

Here are all the quick tips from the article for anyone who may be thinking about selling a business:

• Put yourself in the buyer’s shoes.
• Don’t go it alone. Assemble a team of professionals, most importantly an attorney and an accountant that you trust.
• Get a professional valuation of your business.
• Make sure your financial house is in order prior to sale.
• Familiarize yourself with the entire selling process, from start to finish.

If you are thinking about selling a business in the near future, contact Present Value LLC for all your appraisal and business valuation needs.

By: Present Value

A period of growth, for some companies, might require expansion financing to obtain capital to grow their business. Such financing could be used to support the business’s growth through endeavors such as hiring additional staff, purchasing equipment, acquiring real estate, or ramping up marketing efforts.

Businesses need to demonstrate the clear value of their growth in order to justify financing. While the sources of financing can vary greatly – from banks to friends and family members – for the most part, lenders will require detailed, complete business and operating plans. As we discussed in our last post, lenders are conducting more vigorous due diligence than in the past. So, in addition to the traditional business information, lenders are requiring third-party appraisals to provide greater protection for themselves and their investments.

An appraiser must be able to take into consideration all aspects of a business, including operating costs, assets, equipment, revenue, etc. in order to establish a complete picture of the value of a business. Business potential, economic growth, and market growth are other factors that need to be taken into account for this type of appraisal.

In addition to providing clarity to a potential lender, an appraisal can also help business owners make crucial decisions in a time of economic uncertainty.

By: Present Value

The new edition is expected to be available in October. However, ASB has issued a Summary of Action that will enable appraisers to become familiar with the changes that are part of the 2010-2011 edition. The changes will take effect on January 1, 2010.

The majority of revisions were made to the ETHICS RULE, the COMPETENCY RULE and STANDARD 3: Appraisal Review, Development and Reporting.

Two of the most significant changes are as follows:

• “A requirement was added to the Conduct section of the ETHICS RULE, stating that, prior to accepting an assignment (and if discovered at any time during the assignment), an appraiser must disclose to the client and in the report certification any services regarding the subject property performed by the appraiser within the prior three years, as an appraiser or in any other capacity.”

• “The appraiser’s obligation to allow a client access to his or her workfile when providing a Restricted Use Appraisal Report was removed.”

Present Value is a certified appraisal company and provides USPAP-compliant appraisal reports.

By: Present Value

Business brokers work similarly to real estate agents. They can help you with advertising, initial discussions with buyers, negotiations, and the final transaction processes. Most importantly, a business broker can be a decision-making partner during this crucial time for a seller or buyer.

It is essential to realize that deals are being done, despite the current economic climate. Although there is a lot of doom and gloom out there, there are businesses that are making money and looking to increase their opportunities through acquisition or purchase of assets or equipment. These deals are just being done differently than in the past. Because of the current state of the credit markets, buyers and sellers are developing creative deal-structuring strategies to facilitate transactions and satisfy both buyers and sellers.

In order to take advantage of the opportunities that are still out there and make sure that you are getting the most out of the sale of your business and equipment, partner with an experienced business broker.

In addition to valuation services, Present Value provides business and equipment brokerage services. Present Value has an extensive team of business and equipment brokers who help buyers and sellers come together for transactions with businesses, machinery, and equipment. Present Value’s research team also has relationships with hundreds of equipment and business brokers at both national and international levels.

By: Present Value

Some businesses may succumb to the downturn and will need to sell off assets in preparation for bankruptcy declaration. Others, still stinging from tax time, may simply be searching for ways to save on taxes next year. Still others may be considering an equipment purchase or an acquisition of a struggling business. Present Value can assist business owners in any of these three situations by conducting certified business or equipment appraisals.

“When planning their reactions to the current economy, it’s important for our clients to know the worth of their assets,” said Chris Kinzie, Present Value co-founder. The company recognizes that many of the regulations surrounding equipment appraisals and business valuations can be confusing, and Present Value seeks to provide its clients with the necessary information to help them make informed, prudent business decisions. “We want to help our clients not just make the next choice, but the best choice,” added Kinzie.

Check out our press release on Yahoo Finance: http://finance.yahoo.com/news/Present-Value-LLC-Helps-prnews-15133330.html?.v=1

By: Present Value

Business owners and buyers understand that it is necessary to obtain a business valuation when a business is in the process of being sold or purchased or seeking funding. However, it can benefit private business owners to determine the value of their businesses in order to increase short-term and long-term profitability. If a business owner is potentially interested in selling a business in the future, a business valuation can help to ensure the company will receive the highest price by demonstrating its worth over a period of time. It also can be used as an indicator of business performance, to determine if a business’s strategy is working overall, and to find out how it stands up to competitors in the market.

Valuations combine financial, economic, and market analysis with the strategic understanding of the asset being valued. Business appraisals differ from appraisals of real estate or jewelry in that much of a business’s value can be derived from assets that are not physical, including customer lists, brand names, personal relationships, and other items. Business valuations also often require multifaceted analysis into the risk and return potential for non-tangible and tangible assets that generate value.

A business valuation report generally begins with a description of national, regional, and local economic conditions existing as of the valuation date, as well as the conditions of the industry in which the subject business operates. The value of a business is its fair market value (FMV), defined by the Internal Revenue Service as what a willing buyer will pay a willing seller when each is fully informed and under no pressure to act. A common source of economic information for the first section of a business valuation report is the Federal Reserve Board’s Beige Book, more officially called the Summary of Commentary on Current Economic Conditions, which is published eight times a year.

Business owners need to be able to clearly defend the price of their businesses, and they should know the value of their businesses long before they decide to sell in order to protect themselves. The valuation process requires substantial research, analysis, and tested judgment, which should be overseen by an experienced valuation professional. It is important to consult a valuation professional so that the value of a business will hold up against scrutiny from various parties, including the IRS, the SEC, regulators, courts, opposing council, banks, or potential buyers or investors.

By: Present Value