Inventory Appraisal Services
ARG Recovery inventory appraisal services and products provide lenders, equity and other stakeholders tools and analysis to manage asset values and risk. Recovery advises its clients for prospective transactions, portfolio companies and distressed companies including bankruptcy advisory, liquidation and auction services.
In today’s competitive asset-based loan environment, lenders need every edge to “close the deal” and isolate and minimize risk. ARG Appraisal Group provides lenders the accurate and timely information needed to evaluate risk when considering asset-based loans. As an industry leader in innovations that provide unsurpassed methodologies and data analysis, ARG never sacrifices the commonsense experience that ensures results are weighted with the knowledge of skilled and seasoned professionals. ARG can expand its own considerable, internal resources to a wide circle of additional contacts, business professionals, and leading industry authorities to ensure that the most accurate results are provided.
In many industries, a lot can change between appraisals, leaving the lender with an outstanding loan collateralized by diminished asset values. Since financing inventory presents numerous risks, many of which are not apparent, ARG’s Benchmarking Risk Algorithm is designed to give lenders a series of 60-second, “at-a-glance” risk assessments. An example of ARG’s continuing policy to develop products that help lenders establish and monitor risk, this provides a series of reference points to give enough advance warning that corrective actions may be possible.
ARG recovery services
- Every ARG Appraisal for Net Orderly Asset Recovery Value is performed by seasoned asset-recovery professionals who maintain current knowledge of the asset recovery business.
- Additional critical information is an integral part of an ARG Appraisal report. This type of information includes itemization of slow moving or obsolete inventory, trends of sales and margins, and analysis of merchandise adequacy as to proper amounts/ correct categories.
- ARG Consults with Company management to clarify slow moving inventory and to understand any inventory that might be valued in a unique manner.
- An ARG Appraisal defines what changes in inventory will affect the recoveries and quantifies the result. This enables the lender and the client company to adjust for change and risk.
- ARG studies the appropriate markets to understand current pricing and what is expected in the future.
- A complete study of the Trial Balance is completed to understand all expenses that will be incurred in a sale.
- ARG coordinates with the Lender, when possible, to align eligibility of assets.
- ARG has no objection to the Lender sharing the appraisal with their customers and then discussing the rationale in the work with them.
“The ARG Recovery mantra in Inventory Appraisals is ‘When you really need it to be right.’
ARG Principles have been in the appraisal business for 30 years and know how critical this is. Every ARG appraisal is managed by a Principle of ARG.”
ARG Recovery began operations in 1994 and provides appraisals and liquidation services in almost every industry for lenders, PEGS, business owners and other stakeholders. ARG Recovery provides its services nationally and on occasion internationally with a network of associates located throughout the United States. ARG Recovery’s services include winddown/liquidation management in or out of bankruptcy, receiverships, ABC’s or other solutions such as company, division and bulk inventory sales. ARG Recovery provides full winddown services provide stakeholders piece of mind that the process is completed correctly, efficiently and lawfully.
ARG’s Benchmarking Risk Algorithm is a post appraisal tool to be used by relationship managers and credit managers to measure inventory NOLV based on changes in inventory levels, gross margins, mix, volumes, and operating expenses. Components of inventory value change so rapidly and frequently, lenders must monitor the adequacy of collateral on a frequent basis to ensure that advance rates correctly evidence the current inventory and operations. The tools in ARG reports are designed to give the Lender guidance as to the effect changes in inventory composition have on recovery. These changes are cumulative.
• Varying Inventory Levels – As inventories decrease or increase, the net recovery will change in a direct relationship to the change in inventory. This happens because the change in inventory level will produce commensurately larger or smaller pools of gross recovery against which expenses are offset. Expenses do not fluctuate as much as inventory recoveries. This is shown on the following graph.
• Varying Gross Margin % – Higher gross margins will typically produce higher gross recoveries. In an orderly liquidation, the price for which an item is liquidated is related to the price for which that item has recently been sold. If a company is experiencing declining gross margins, it is selling its product to customers at lower prices relative to the cost. This will be reflected in the liquidation recovery as in the following graph.
• Varying Top Producing SKU’s as a % of Total – While ARG does not agree with the “80/20” rule (that 80% of the value will be produced by 20% of the inventory), the mix of the merchandise does directly affect the return in liquidation. ARG allows the lender to monitor the inventory mix by ranking the inventory at the SKU level by sales. When a significant percentage of the sales are accounted for at 80% or 90%, the inventory should be subtotaled and expressed as a percent of the total inventory. As this percent decreases, so will the recoveries as shown on the following graph.
• Varying Sales – The most direct effect historical sales have on recoveries is capacity and a business’ ability to generate gross recoveries in an abbreviated period. In a case of declining sales, where sale term remains constant, gross recoveries decrease. To keep this from happening, the length of the sale can be extended, but that is often with an increase in sale expenses which offset the increase in recoveries. As sales decrease so might recoveries as shown on the following graph.
Cumulative Effect of Changes. It is extremely important to note that the effect of the above changes is cumulative. ARG has added notes, “Call ARG”, on each graph, to indicate that a reappraisal of the inventory is prudent because that particular benchmark has deteriorated to the point that the collateral value is in jeopardy. These points are indicated at a level of decline for each benchmark that would result in a loss of net recovery of approximately 5%. However, if three benchmarks decline by 3% to 4% each, which would not independently cause concern, the cumulative effect would be a decline of 9% to 12% in the net recovery value of the inventory. These benchmarks are estimates only and extrapolated from current data and, as such, not intended to replace periodic reappraisals. At each reappraisal the benchmarks will be reset to provide for the company’s current operating experience.