FCUs Can't Use 'Going Concern' ValuationFor MBLs

Register now

ALEXANDRIA, Va. - (09/29/04) -- A federal credit union may not usethe 'going concern' value of a business when calculating theloan-to-value ratio for a member business loan, but must base itsLTV valuation purely on the market value of the secured property,according to NCUA. In order to use the going concern method, whichincludes goodwill and other aspects of an operating business, acredit union must obtain a waiver from NCUA, the agency said in anew legal opinion letter issued to Community Financial Members FCU,Plymouth, Mich. The intangible value of a business, noted NCUA, maydecline significantly in business downturns, lawsuits, managementchanges, bankruptcy, or other events.

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER