Machinery and equipment appraisals are becoming a common request from banks and lenders that are currently lending in today’s environment. Having been burnt by the bubble of real estate assets and the loss of value that have caused the worth on their books to shrink, lenders have started to see the benefit of getting a certified USPAP (Uniform Standards of Professional Appraisal Practice) compliant machinery and equipment appraisal for their business loans. Historically, lenders would rely on book value or uneducated opinions to place values on these assets. These values do not withstand scrutiny with bank examiners, U.S. Small Business Administration, IRS, attorneys, CPAs, courts and others. In addition, with the possibility of the loans going bad, lenders need to have an accurate estimate on what the machinery and equipment may produce when sold off in a loan-gone-bad situation. Typically, lenders will order Fair Market Value estimates on the equipment and then apply their internal discount percentage to decide what amount to count as collateral for a loan they are considering to issue to the borrower. Lenders often never see the assets that are being used for the loan collateral due to their busy schedules since banks have downsized leaving the remaining commercial loan officers more to do with less time and resources. Using a third-party, certified machinery and equipment appraiser can go onsite to make sure the collateral exists while providing a estimate of value.
Equipment Appraisal Blog | Understanding Machinery Appraisals
Equipment Appraisal Services is committing to help educate business owners, lenders, accountants, and attorneys in regards to the specifics and process of a machinery and equipment appraisal. Historically, many professionals and business owners relied on guessing, unqualified individuals, or book values to determine asset values. Unfortunately, these methods result in inaccurate and potentially risky results that could be scrutinized by the IRS, the courts, or opposing attorneys. A certified machinery and equipment appraiser has the credentials and expertise to produce a third-party machine appraisal. There are many reasons that a USPAP (Uniform Standards of Professional Appraisal Practice) compliant machinery and equipment appraisal may be required. These include appraisals on machinery for situations related to divorce, partnership issues, buy/sell agreements, estate planning, 1031 exchanges, litigation, tax purposes, business valuations, and business purchase price allocations, to name a few. A certified machinery and equipment appraiser will ask the right questions, research the items to find comparables, and put together a professional USPAP compliant report. They have the ability to find fair market value, orderly liquidation value, and forced liquidation value for machines. An appraiser should also have the best tools for developing values. For example, our company has access to a database of over 4 million items for use in generating comparable transactions. We look forward to continuing our dialogue with you in future posts on our Machinery and Equipment Appraisal Blog.
Tags: Equipment Appraisal