Deal Academy:

Valuation Tips for Identifying Financial Distress
in an Uncertain Economy

We’re in a bit of an uncertain economy, aren’t we?  Some sectors are on fire, other’s seem sluggish.  With the election cycle in full swing, economic indicators bouncing around, and questions as to where we are in the economic cycle, it makes sense to cast a critical eye towards potential business acquisition loan candidates.

Identifying Financial Distress

Who wants to waste time on a deal that plods along for months but ultimately doesn’t close? We all want to close more deals- and having a full pipeline is the surest way to get there.  But wasting time on deals that will ultimately go off the tracks in underwriting or valuation dilutes your ability to focus on the gems.

Instead, let’s help you focus on those top contenders.

With the economy steaming ahead it’s easy to assume that deals only have upside.  But as a banker, analyzing the financial stability of a business loan applicant is a critical skill.  Using that skill to separate the good from bad is a great way to fill the pipeline with “top talent.” It is important to quickly identify red flags that a company is in financial distress. This financial distress is often as a result of external factors in the uncertain economy that affects us all. In valuations we see a lot of patterns and frequently see five conspicuous areas that indicate a company may be in financial distress at the hands of the larger uncertain economy:

As a commercial lender, digging deep into the financial analysis of a company from the onset can uncover these and other indicators that the uncertain economy is wreaking havoc on an unassuming client’s small business. Being able to quickly identify these red flags can protect both lender and business owner when proper measures are taken to ease the financial distress and reverse the damage.  While some deals mandate engaging an outside valuation, even in situations where it isn’t a requirement it can be a method to thoroughly vet risk exposure – especially in an uncertain economy.

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How can Quantive Help?

Our Exit Planning Program is designed to help ownership proactively plan for their “third act” – life after business.  It starts with our gap analysis program: Launch Pad. 

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Business Valuation Purposes

BUY-SELL AGREEMENTS

Quantive performs business valuations in support of buy-sell agreements, to include buy-ins and -outs, as well as shareholder disputes.

VALUATIONS FOR DIVORCE

We perform business valuations in support of divorce proceedings, working either jointly retained or on behalf of one spouse.

PURCHASE AND SALE

Smart entrepreneurs routinely retain Quantive to understand price early and gain a roadmap for impending price negotiations.

LITIGATION SUPPORT

We provide litigation support for shareholder disputes, lost profits, shareholder oppression, commercial litigation, and various other reasons.

ESTATE AND GIFT

We perform valuations in support of various gifting strategies, as well as in support of probate requirements.

SBA LOANS

Quantive is qualified to perform valuations in support of SBA financing. Our reports are compliant with all SBA SOP’s.

INSURANCE

Quantive values companies for a variety of reasons related to insurance to include establishing values for funding buy-sell agreements.

OTHER

We perform valuations for business planning, gap analysis, lost profits and damages, and a variety of other reasons.

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