The growing relevance of personal character in business lending

Welcome to another episode of the “Professionals of the Inland Empire” podcast hosted by John Tulac. Today’s featured guests are Marco Arcadia an experienced banker in commercial banking, and business broker Edward Fixen.

Marco Arcadia is Senior Vice President at Columbia Bank. He has an extensive background in commercial banking. He began his career at Union Bank of California in the mid-1990s and served in the Marine Corps reserves during his banking tenure. His education sparked an interest in finance, leading him towards a banking career, and he currently provides financial advisory services at Columbia Bank, where he specializes in aiding clients with decision-making concerning business growth, acquisitions, and financing. Arcadia emphasizes the importance of establishing transparent relationships with clients and offers personalized services, ensuring prompt communication through various channels.

Ed Fixen is the founder of BusinessQuest Brokers. He transitioned from being a consulting engineer for 17 years to owning a business in 2000, leveraging his personal journey to find the right business opportunity. Fixen established BusinessQuest in 2006, focusing on business brokerage and valuation, with coverage in Rancho Cucamonga and Redondo Beach, aligning closely with Marco’s banking expertise. Over his 20-year career in the business sales arena, he has successfully sold over 200 businesses and possesses dual expertise in business appraisal and valuation, working diligently on estate planning, litigation, and other valuation needs, supported by a team of five business brokers and one valuation analyst.

In terms of valuation insights, Fixen discusses the various methods for valuing businesses, including the asset approach, which emphasizes the balance sheet and adjusted book value; the market-based method, which utilizes multiples from previous industry transactions; and the income method, focusing on prospective cash flows and profitability. He points out that over 44 recognized methods exist for business valuation, particularly those applicable in California, especially during litigation situations. The valuation process remains subjective, heavily influenced by market conditions and the specific business sector. For instance, businesses providing similar income may achieve different valuations based on growth potential and profit margins—highlighting why technology companies might command a higher multiple compared to retail businesses despite comparable revenues.

In his discussions regarding banking relationships, Ed reflects on the growing relevance of personal character in business lending, noting that while regulators have moved away from character loans, they still play a role in the underwriting process. Understanding the owner’s experience and business stability are critical factors for successful transactions. He emphasizes that collaboration among bankers, brokers, and attorneys is paramount to achieving business growth.

The PIE podcast aims to showcase Inland Empire professional talent, foster local economic development, and highlight the Provisors networking community. Catch the full show on YouTube @ProfessionalsofInlandEmpire.