Articles & Whitepapers

What a difference time makes. Three years ago, most banks were enjoying low levels of past-due accounts, criticized/classified loans and losses in their small business portfolios. Then came the recession and the financial crisis, which led to record losses and the subsequent failure of many banks. It's easy for bank management to point to the financial turmoil as the cause of their problems, and it has certainly been a major factor in banks' struggles. When looked at objectively, however, it's clear that many banks made some key mistakes and poor assumptions that resulted in making a bad situation much worse.
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A primary cause of concern among many banks today is the high rate of default on government agency guaranteed small business loans like Small Business Administration (SBA), Farm Services Administration (FSA) and Farmers Home Administration (FMHA) loans. In the "good old" days, when these loans hit 90 days past due, the bank simply filed a claim, sent the government agency the credit file and the agency took it from there.
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When a company is sold for more than net book value, this results in an accounting concept known as goodwill. If you are relying on reviewed or audited financial statements from borrowers, you should be aware of their obligation to test for goodwill impairment.
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Business value is a sensitive subject with owners these days. In general, business valuations are down because of the economy, but as baby boomer business owners age, many are looking for a lucrative exit plan. How can owners build more value in their companies? Valuation experts always come back to the basics - identify and focus on the things that drive value for the organization. Below are a few common value drivers to consider:
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Many people find great joy working in a family business. Spending time with relatives and moving toward a common goal can be fun and fulfilling. Families who work together often feel an especially close bond because of their shared business interests. However, for every family business that hums along on these shared aspirations, there's another that's disenchanted and unhappy. In such a situation, perhaps neither the company nor its family-member shareholders and employees are prospering.
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When times are good and businesses are making record profits, management tends to pay less attention to what's going on behind the scenes. It's often only when things are tough that problems are discovered. As investor Warren Buffet once said, "You only find out who's swimming naked when the tide goes out." Well, the tide has gone out for many companies. Is yours one of the businesses Buffet was referring to?
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After years of experience, owners often have a general sense of how their company is doing at any given time. But this vague notion of performance really isn't enough. As management gurus will tell you, "You can only manage what you measure."
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When most small business owners think about retirement plans for themselves and their employees, they think about 401(k)s, SEP IRAs and profit sharing plans. These are referred to as defined contribution plans. However, there may also be a place for a defined benefit plan within a small business. Also known as pension plans, these are usually thought of as benefits for employees of large corporations or unions. But given the right circumstances, they can present a tremendous opportunity for small business owners to build wealth by saving significantly more for retirement than they can with defined contribution plans.
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