A federal credit union may not use the "going concern" value of a business when calculating the loan-to-value ratio for a member business loan, but must base its LTV valuation purely on the market value of the secured property, according to NCUA. In order to use the going concern method, which includes goodwill and other aspects of an operating business, a credit union must obtain a waiver from NCUA, the agency said in a new legal opinion letter issued to Community Financial Members FCU, Plymouth, Mich. The intangible value of a business, noted NCUA, may decline significantly in business downturns, lawsuits, management changes, bankruptcy, or other events.
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