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
Posted in business appraisals, equipment appraisal | 2 Comments »

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
Posted in Equipment Auctions, equipment appraisal | No Comments »

Glimmers of Hope in Small-Business Lending

After more than two years of stagnation, it appears that small-business lending is on the rise. The Thomson Reuters/PayNet Small Business Lending Index, which measures the overall volume of financing, increased 4% in March 2010, the first year-on-year gain since October 2007.

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

Tags: appraisal, business appraisals, Business Valuation, certified machinery and equipment appraisal, equipment appraisal, PayNet, present value, small-business lending, Thomson Reuters, Time Magazine
Posted in Business Valuation, Machinery & Equipment Appraisal, business appraisals, small business | 1 Comment »