Assets that may cause your lender concern include outdated technologies. If your business is a manufacturing concern, a lender will realize that outmoded equipment hurts competitiveness.
If you are an investor in a partnership with liability for future capital calls, your income or cash flow projections will be discounted by the lender. Partnership interests are notoriously illiquid. Plan on your lender discounting net asset value estimates.
Ask for enough money the first time. Don't get in a situation of having to go back for more money. For example, if you have potential exposure for a $200,000 capital call from an investment, don't ask for a line of credit for $100,000 because you don't think the partnership could possibly ever need more.
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If all other things are acceptable (cash flow, stability, assets) and you have the $200,000 exposure, ask for $200,000. The lender will be more comfortable knowing that you will have enough money to cover potential liabilities and he/she won't be put in the position of having to approve another loan to protect the first one!
If you own stock in a closely held company, it is virtually unmarketable. Letter stock or "144 stock" cannot be easily sold. It won't do your lender any good to seize something for a delinquent loan that can't be used to reduce your indebtedness. Expect a discounted value.
The valuation of personal businesses is a very tricky area. While your valuation may be perfectly legitimate for a going concern, it does not reflect what could be obtained if you were no longer running the company or if you were to sell it at a distressed price.
If something developed that hurt your business so that you could no longer generate sufficient cash flow to repay the loan, then it would no longer be as valuable! About the only thing a lender could then sell would be actual tangible assets, which would be used and depreciated.
While not a problem, certain prepaid assets hold little collateral value for a lender because they would not be worth much in liquidation. For example, if you prepay your rent or insurance premiums to get a discount, that is an asset to your company. However, it interests a lender only as it affects your cash flow not as collateral. Deposits that you have paid for things such as equipment leases, rent, or utilities are also of negligible value.
Problem Personal Assets
On a personal loan application there will be a line for estimating the value of your household goods. While your furniture may seem valuable to you for many reasons, a lender will value it at about 10 cents on the dollar of the purchase price.
Attach a note to your financial statements saying that art work or other collectibles are listed at retail value. If you have current appraisals, include them. If not, note how you arrived at the value (e.g., questioned local art gallery).
Art work and collectibles will be taken into account by the lender at wholesale value, or approximately 50 cents on the dollar. That is what a lender could sell it for quickly.
1 Assets that present liquidation problems to your lender will be sharply discounted by the lender.
2 Farm property, partnerships, non-income producing real estate, and stock in closely held companies are prime examples of problem assets.
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