Secured lenders increasingly rely on appraisers for swift and accurate valuations amid rising complexities in asset-based lending. With business bankruptcies up 40% and ongoing supply chain challenges, appraisers must adapt quickly to maintain their vital role in the underwriting process, ensuring lenders receive the critical insights needed to navigate this evolving landscape.

Secured lenders are increasingly dependent on appraisers providing accurate
valuations and those assessments are needed quicker than ever. As deals become more complicated and competitive, asset-based lenders rely on adept and knowledgeable appraisers to help facilitate the underwriting process no matter the product or economic cycle. In turn, appraisal costs are on the rise, and secured lenders are feeling the pinch.

Whether it’s COVID-19 or geopolitical conflicts impacting the supply chain, or the recent rise in corporate and personal bankruptcy filings, appraisers are constantly adapting to the new normal. According to data from the Administrative Office of the U.S. Courts, US business bankruptcy filings were notably higher for the year ended June 30, 2024, up 40% from the year prior. But despite the uptick in bankruptcies, Alex Sutton, managing director, head of research, at Gordon Brothers, argues that the majority of companies remain healthy and are “benefiting from increasing availability of capital from the secured lending market.”

Of course, there are lingering effects of the pandemic and the supply chain crisis. According to Sutton, aerospace, in particular, is still experiencing long lead times and capacity shortages. Certain building product sectors, such as lighting and hardwood flooring, have been active in the distressed space. Dollar stores are also seeing a decrease in consumer demand. Most would suspect that these lower-end retailers would benefit from inflation and the rising costs of goods. But Sutton notes that dollar stores are simply sitting on too much inventory, making the mistake of ramping up too much during the pandemic. Overexpansion in the dollar store space and price increases on items in the stores have also added to the oversupply of inventory.

And, as Americans went back into the office and the pandemic cloistering in the home ended, the demand for alcoholic beverages, especially higher-end distilled bourbons and whiskeys, slowed. Sutton notes that a decade of increased production in this industry and the flood of new brands into the marketplace couldn’t have come at a worse time. “We are seeing too much inventory and a weakness in pricing,” he adds. Plus, many new entrants in the space are sitting on extensive amounts of bulk inventory, leading to the question as to where it will end up.

Supply chain problems did serve to temporarily and artificially inflate the value of some in-demand items, says Stan Czupryna, senior appraiser at Loeb Equipment. He notes that mask and some test making lines are now sitting in warehouses with little to no hope of recovery. Czupryna explains it’s the charge of appraisers to constantly educate the secured lending community, especially when industries experience a boom and then demand for their products wane. “We all have a duty to elevate this industry and let the banks and all lenders know they are getting the right information each and every time,” he says. “We go in with a blank canvas and come up with an opinion on value that we have to support.”

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