She said now they’re having things appraised. Is this a bad sign?
In: Other
It’s not great, champ. They’re unable to borrow any more money and are looking to get their assets valued in order to presumably sell them or use them as collateral to get more loans.
If you work there, you should be leaving
To answer your last question first, Yes, this is a very bad sign.
Many companies obtain from a bank a “line of credit”, which allows the company to easily borrow modest amounts of cash on pre-arranged terms. It’s used normally to smooth over irregularities in income, so the company can pay its suppliers on time. A line of credit is a bit like a credit card, except that the credit is always “secured” by something.
The security could be actual hard assets, like a building, or it could be something more abstract, like expected accounts receivable. Obviously the bank will charge more interest when the security is risky like that.
Maxing out your line of credit is a sign that the company is likely failing. Using LOC money to make payroll is the worst, and may not even be allowed by the bank’s loan terms. A company that fails to make payroll is dead – it’s not legal to continue operation (US, all states I am aware of)
The credit line is the amount of money that the business is allowed to borrow from the banks. They do a lot of math with a lot of variables to figure out what that amount is. In essence, it is the maximum amount of money that the bank is willing to risk lending to you or a business.
If they’re at the edge of that amount, and need more, then that’s not good
It means you should update your resume, reconnect with any useful networking contacts and cut back your spending and up your savings.
Time to jump ship; they have exhausted their ability to borrow money; this means that the company can’t make enough money to operate and make the monthly loan payments. Having their things appraised is a desperate measure to see if they have enough collateral to borrow more money. Unfortunately, “things” depreciate with time unless it’s property or natural minerals.
> now they’re having things appraised
This is equivelent to receiving your pinkslip this coming Friday. You’re possibly also not gonna get your next paycheck let alone any severance. You’ll totally qualify for unemployment, though.
You should have been looking for a new job months ago, that’s what it means.
The line of credit is money that banks have agreed to loan the company. Run out means the banks won’t loan out any more money, and the money already loaned out has been spent.
Things being appraised means the owner is preparing to sell those properties off (or use them as collateral for more loans, still not good)
Tldr for an employee? It means the company is hemorrhaging money and you should be sending out applications.
Many companies operate on debt, their credit line. Paid off regularly with revenue and then borrowed again. If that has been exhausted and financial institutions won’t lend more then those institutions have determined they’re unlikely to be able to pay back additional debt.
The assets bit means they’re trying to put a price tag on what they have for sale or as collateral for additional loans.
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