When commercial lenders have advance knowledge of hidden risks and liabilities, they can advise customers on ways to minimize their potential exposure and possibly preempt loan defaults. Or they may decide to deny a loan altogether. Read More

Lenders often have a stake in private company mergers and acquisitions, so it’s important that they know whether the target’s price is reasonable. Procuring a professional appraisal upfront can mean the difference between a long-term lending relationship and default. To help make informed lending decisions, lenders should know the standards of value used by appraisers, along with their valuation methodologies. A sidebar to this article points out the dangers of relying on generic valuation formulas. Read More

In a downturned economy, operating inefficiencies can push shaky companies over the edge. On the other hand, healthy supply chain management can help avoid inefficiencies. A strong system displays these chief characteristics: Read More

Internal controls are a system of policies and procedures businesses put in place to protect assets and improve operating efficiency. Internal controls specify how companies direct, monitor and measure their resources. Moreover, they are your borrowers’ first line of defense against fraud. Read More

Forget net income and book net worth. When it comes to monitoring creditworthiness, cash is king. Every business experiences occasional cash shortfalls — that’s why they need lines of credit — but borrowers with chronic cash deficits may be on the brink of default. Read More

Chief financial officers are increasingly pessimistic about economic conditions, according to a recent Duke University/CFO Magazine Global Business Outlook Survey. For the first time in the survey’s 13-year history, bears outnumbered bulls nine to one. In fact, many CFOs don’t expect the recession to end until 2010 or later. Read More

Although borrowers often pledge inventory as loan collateral, the amount shown on their balance sheets isn’t always accurate. In fact, inventory can be a source of mistakes because its accounting is complex and the volume of transactions that flow through the inventory ledger is high. If management is lax about inventory, problems can easily spiral out of control. Read More

The corporate finance world is in a state of flux: Banks continue to retrench after a disastrous 2008, tightening credit standards and following borrowers more closely. Borrowers also are rethinking their capital structures and lending decisions. For now, conservatism is the name of the game.

Examining the supply side

Last year many financial institutions were hurt because they’d made poor lending decisions. The credit market was overheated, but now the pendulum has shifted and banks are re-evaluating risk and finding ways to prevent future losses. New policies include: Read More

If one of your borrowers suddenly lost a key person, how would it affect their productivity, profits and ability to service debt? For many small businesses, the death or long-term disability of an owner or key employee spells disaster. Some businesses eventually recover after finding and training a replacement, but others are so reliant on key people that they’re forced to close shop. Read More

As businesses continue to face economic uncertainty, rising costs and tighter credit standards, many are revisiting their capital spending budgets and prioritizing purchases to weather the storm. Before approving a new loan or a credit-line increase, consider whether borrowers have considered these cost-saving alternatives. Read More