Risk Management for Lenders by Utilizing Machinery and Equipment Appraisals
As banks and credit unions search for ways to improve their risk management, many lenders are uncovering the fact that most commercial loans were based on opinions or book values to establish the collateral amounts. Unfortunately, this has created many under-collateral loan situations as bank examiners uncover reasons why loans have failed.
If the appraisal you obtain is not USPAP compliant it is not a considered a “qualified” appraisal prepared by a “qualified” appraiser pursuant to the Council of Foundations, IRS, or others potentially opening yourself up to increased costs, liability, risk, and an unsubstantiated equipment appraisal.
In addition, the depreciation schedule is only important to the business owner, CPA, and IRS and does not provide the fair market value, orderly liquidation or forced liquidation value an an asset.
A certified USPAP compliant machinery and equipment appraisal is a way for a Commercial Loan Officer to document that their loan decision was based on independent third-party conclusions of value, fulfilling their responsibility and obligation of risk management in regards to machinery and equipment collateral.