Brett BoehmBy Brett Boehm


Turnarounds often involve a good bit of housecleaning. But it pays to recognize that some of that “junk” on the balance sheet—such as charged-off leases and non-performing commercial loans—can help start the revenue stream.

Turnarounds involve making difficult decisions:  where to focus resources, when to trim expenses in other areas, how to regenerate a revenue stream—both for the short term and the future.

But one of the easiest decisions any company involved in a turnaround can make is to sell its charged-off debts. They are, quite frankly, “found money” on the balance sheet, and selling them is one of the easiest ways to begin generating revenue through a turnaround.

In the 16 years I’ve worked as a buyer of nonperforming commercial leases, loans, lines of credit, and other commercial accounts, I’ve learned firsthand how to evaluate charge-offs.  I also know that very few business owners—especially those immersed in the complex process of turning around a failing company—truly understand the potential value that their charged-off loans and leases hold. Let’s face it:  every turnaround effort entails enough difficult decisions and more urgent priorities than scouring the balance sheet for charged-off debt, trying to assign a value to it, and find a buyer for it.

But to companies that have made a business of buying charged-off leases and commercial loans, they are our stock in trade. Such companies buy charged-off accounts outright, paying cash upfront for them. They would not be in business if they could not do this profitably and make it easy for clients. Companies undertaking a turnaround are often eager to wipe their balance sheets clean. However, what many of them don’t always recognize is that they can also generate revenue while they’re cleaning. Understanding how the charged-off accounts are evaluated could help anyone involved in a turnaround recognize the hidden value in their own non-performing paper—one of the first steps toward transforming their charge-offs into a source of revenue.

So, What Are My Charge-offs Worth?

If the company being turned around is a new acquisition, the new owners often have a difficult time assigning a value to any charged-off loans or leases on their balance sheet. However, buyers of charged-off commercial accounts know how to identify the value of these accounts and successfully collect on them. Remember, that’s the cornerstone of their business, and they have developed sophisticated analytical tools, a wealth of direct experience, and extensive databases of information on collecting upon comparable accounts to help them determine a realistic valuation for the charged-off accounts they buy.
Such buyers know the questions to ask:  Are the lessees still active? Are there guarantees? What are the balances that are owed? How old is the charged-off paper? How many times has collection been attempted on it, and by whom? Is the debt secured? Is there value in any of the equipment, or has it been repossessed? What is the status of any litigation? Answers to questions like these are critical to establishing the value of a charge-off.

The Collectability Factor

Buyers of charged-off accounts establish the value of those accounts by determining their likelihood of extracting any residual value out of the portfolios they purchase. A few general guidelines contribute to this so-called “collectability factor” and are often the foundation of any success the buyer realizes in making a profit on a given portfolio that has been purchased. Companies undertaking a turnaround often have many charged-off loans or leases on their balance sheet—many of them a direct result of, or contributor to, the difficulties the company had before the turnaround was initiated.

Special Benefits for a Clean Start

Once buyers of charged-off accounts have weighed the collectability factor of a portfolio and made the decision to buy it, they are able to succeed at collecting because they have the time, money and resources to dedicate specifically to pursuing recovery. The buyer always collects in its own name, so when charge-offs are sold, so too are any liabilities associated with their future collection. This is especially significant in a turnaround situation, where a new owner is often very eager to sever all ties with the failure that inevitably preceded the turnaround effort.

Selling charged-off accounts is one of the most mutually beneficial relationships available between sellers and buyers of charged-off paper. But for companies attempting a turnaround, it holds even greater benefits because it helps wipe the balance sheet clean while generating critical initial revenue flow.


Brett Boehm is the principal/director of business development for TBF Financial, LLC. Headquartered in Deerfield, Illinois, TBF has been the leading buyer of non-performing commercial paper since its inception in 1998. A 1998 graduate of The John Marshall School of Law and an attorney licensed in the state of Illinois, Boehm has been with the company since its founding.


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