Small Business Lending Still Considered Sluggish, According to Federal Reserve

Despite recent indications that banks were beginning to lend to small businesses again, which we discussed in a recent blog post, at a recent small-business forum, the Federal Reserve chairman, Ben Bernanke, indicated that he was still concerned about the lack of small-business lending.

A recent New York Times article notes that experts are unsure why small-business lending has continued to decrease. Bernanke was quoted as asking: “How much of this reduction has been driven by weaker demand for loans from small businesses, how much by a deterioration in the financial condition of small businesses during the economic downturn, and how much by restricted credit availability?” He then went on to say that it was likely all three were contributing factors.

The article posits that small business owners believe that lenders are not lending to creditworthy businesses because of heightened paranoia following the economic downturn, while economists cite potential borrowers’ weak economic fundamentals as the reason for sluggish lending.

According the article, lenders say they have returned to basics in terms of lending fundamentals after being too lax, which means conducting more careful due diligence, including taking into account businesses’ collateral and cash flows. Understanding what lenders are looking for and how a certified appraisal fits into lending criteria can help business owners find the funds they need to grow.

By: Present Value

Additional Reading

Glimmers of Hope in Small-Business Lending

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

Lenders Turn to Present Value LLC for Pre-Loan Due Diligence

Tags: Ben Bernanke, Business Valuation, certified appraisal, Collateral, Federal Reserve chairman, Machinery and equipment appraisal, New York Times, present value, Real Estate, small-business lending
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The Importance of an Unbiased Third-Party Opinion

To derive a proper opinion of value, no matter what the situation, getting an appraisal performed by an unbiased third party, such as a certified appraiser, is always the best course of action.  To be unbiased, the professional developing the opinion of value should not have any vested interest or participation in the opinion of value.

For example, many auction companies advertise that they perform appraisal services when in most cases, their primary business is the performance of an auction and not being an independent appraisal entity. Oftentimes, an auction company will perform an appraisal in lieu of obtaining a certified equipment appraisal as part of an agreement to list and sell the property. However, because the auction company potentially has a vested interest in the outcome of the auction, their appraisal is not unbiased, which could result in an inaccurate estimation of value.

Another example we can look at is how large lending institutions perform and order valuations. The Small Business Administration requires lenders to obtain third-party valuations so there is no appearance of collusion between the appraiser and lender. Furthermore, if the valuation was not properly defined and constructed, this could affect a borrower’s ability to obtain financing for purchase or sale situations, or jeopardize buyouts, refinancing, buy/sell agreements, and anything pertaining to the value of the assets.

Make sure that your equipment appraiser is an independent third party who can truly act and perform in an unbiased manner so that the appraisal meets the requirements of financial institutions, government agencies, buyers and sellers, shareholders, and partners, and so that you really know what it’s all worth.

By: Present Value

Additional Reading

Be Sure to Use a Reputable Appraiser

Machinery and Equipment Auctions

Equipment Auctions

Tags: certified appraisal, certified machinery and equipment appraisal, equipment appraisal, Equipment Appraisals, equipment appraiser, equipment auction, SBA, small-business lending, third-party appraisal
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Why use a certified appraiser?

A survey was recently conducted at an American Institute of Certified Public Accountants Conference in which more than 100 CPAs said that when assigning value to a business’s tangible assets, like machinery, one of the biggest problems they face is liability risk as a result of invalid information. This is one of the reasons why it’s important to have a certified appraiser research and assess your business’s assets and compose a reliable valuation report.

A certified machinery or equipment appraisal is one that is compliant with the standards of both the National Equipment and Business Builders (NEBB) Institute and the Uniform Standards of Professional Appraisal Practice (USPAP), and verified with a personal inspection, research, data, documentation, and photographs. A certified appraiser will eliminate guesswork and tell you the fair market value of your machinery and equipment, rather than your assets’ book value, which, unlike a fair market valuation, has no comparables. You can also ask a certified appraiser to tell you your equipment’s liquidation value, salvage value, or replacement cost.   Beware the valuation of auctioneers or machinery and equipment dealers. Auctioneers and dealers may deliver valuations inconsistent with fair market value in anticipation of an auction or a profitable sale. And most auctioneers and dealers who are asked to provide an appraisal report will not deliver one that is USPAP compliant, which means that it will not meet the needs of governing authorities. By relying on non-certified appraisers like these, you open yourself up to increased costs, liability, and risk.  Present Value is a certified member of the NEBB Institute and its professionals are USPAP compliant and provide customers with certified appraisal reports that meet the requirements of financial institutions, government agencies, buyers and sellers, shareholders, and business partners. For more information about the machinery and equipment appraisal services available through Present Value, click here. By: Present Value LLC

Tags: certified appraisal, equipment appraiser, Machinery and equipment appraisal, NEBB, USPAP
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