Back to Basics — Family ties might belie good judgment
Abstract: Lenders often develop their closest relationships with family businesses. But, as they get to know a company’s family members, they may unearth questionable business practices that jeopardize debt service, especially as the company transitions to second-generation ownership. As this article explains, having family members on the payroll is just one example of a related-party transaction. Other areas to watch for are variable interest entities, commonly owned suppliers and customers, quasi-business expenses, and related-party loans.