Equipment Appraisal Blog | Understanding Machinery Appraisals

Dealing with Divorce: How an Equipment Appraisal Can Help

Posted by Equipment Appraisal Services on Tue, Mar 29, 2016 @ 10:00 AM


Divorce is almost virtually never a simple process. When people who shared their lives decide to leave a marriage, it's natural for each party to want what's best for them. When it comes to dealing with equipment values, having a professional equipment appraiser provide a machinery valuation helps ensure everyone gets a fair share of the business. Here's why.

Dealing with Divorce: How an Equipment Appraisal Can Help

  • Equipment values are different that that of home, auto or cash item values. While it's much easier to identify the value of common, everyday items, machinery values can have a range. This range can be manipulated by one party to ensure they're getting a better deal than the other party is receiving. This often plays out that the leaving partner wants a higher amount of the business than the remaining partner is willing to sacrifice out of concerns for whether the business is able to remain solvent. Which ever side of the divorce you're on, having an equipment valuation performed by a certified machinery appraiser means the value will be determined in a way that is fair to everyone.
  • You need to meet legal requirements. Though there are a wide range of appraisal methods that can be used on business equipment, the court system often limits the methodologies that can be used to determine equipment value when dealing with the dissolution of marriage. The most common methodology is determining fair market value, which takes a wide range of changing factors into account, to determine a value that is fair to both sides of the dissolution if the business is to remain in operation.
  • But what if there's a push for one partner to get out of the business? In cases like this or when the equipment needs to be sold quickly so that both parties can receive their appropriate profits, fair market removal may be used.
  • If a situation is in place where both parties want out of the business and need the money quickly to start their lives over, they may be willing to settle for liquidation value, which provides a significantly lower value for the machinery, but tends to produce a solid cash value for the equipment which would then be split equitably among the parties. Though this is a rarely used technique, it is still in place in many no-content divorces and similar situations where neither party is remaining vested in the company's interests.
  • Certified machinery appraisers can work from a variety of positions. They can be hired by one spouse, the other spouse or by council. They can also work for both spouses, helping both parties reach an equitable distribution of the business value. Because divorces often demand a certain amount of testimony, make sure your appraiser has experience working in that type of situation.

Divorce can be a messy process, but equipment appraisals helps make sure everyone's interests are addressed during the process. If you haven't had the chance to speak with a certified equipment appraiser, we're here to help.

Tags: Equipment Appraisal, Litigation, divorce appraisal

What an Appraiser Investigates During a Printing Equipment Appraisal

Posted by Equipment Appraisal Services on Tue, Mar 22, 2016 @ 10:00 AM


If you're in the printing industry, you may have considered having a printing equipment appraisal performed to determine the value of your machinery. But what exactly is involved in having your machine appraisal performed and what is an equipment appraiser looking for when they inspect your machinery? Here's our take on what is considered when a printing equipment appraisal is performed:

What an equipment appraiser looks at during a printing equipment appraisal

  • Does the printing machinery perform properly? This will take a solid look at the quality of the materials the printing machinery is producing, whether it's in the printing quality itself, the binding, edge cutting and trimming or similar processes that are common to printing industry production work. A machine that isn't doing its work properly or needs to be constantly reset to stay within specs may receive a much lower machine appraisal than printing equipment that is functioning as it should, due to the problems such machinery may have down the road in maintaining regular quality.
  • Has the equipment been well maintained? This will tell the appraiser about whether further inspection of related systems is warranted. If needed repairs have been put off, it can cause additional wear and tear to connected systems. A qualified machine and equipment appraiser knows they need to check for further issues at that point. You can provide easy documentation of maintenance and repairs through logs, receipts or other service records, helping make that part of the process go a little easier. Poorly-maintained printing equipment tends to have a shorter lifespan and lower value.
  • Is the machinery being kept in extremely hot, cold or humid temperatures or dusty, dirty conditions? If it is, it may also wear faster than other machinery that is kept in better conditions. This will also usually cause a lower valuation due to a shorter expected lifespan.
  • Does the machinery show signs of significant damage or abuse? If your printing equipment has serious dents, bends or structural issues, it may cause safety issues or fail much sooner than similar printing equipment that has been taken care of properly. A good appraiser will take this into account in terms of how such abuse will affect the expected value of the machinery.
  • Has the machinery been altered or had features added that were not approved by the manufacturer? If after-market additions make the machinery work harder to get the job done, even if it provides better features or more convenience, it may cause the machinery to wear faster and have a lower value.
  • Is the machinery in demand in your industry? Current market trends can affect the appraised value of your equipment, no matter what your reason for having the appraisal performed. If your industry is booming, the equipment may be valued at a higher figure, while an industry that is in a serious slump may have a hard time selling used equipment.

By knowing the value of your printing machinery, you can make better business decisions, whether it's when to sell old equipment, if you have the assets to back up a potentially risky business opportunity or to gain financing for an expansion that uses your equipment for collateral. If you need to have your printing equipment appraised, please contact our certified equipment valuation specialists to schedule an appointment.

Tags: printing equipment appraisal, commercial printing

Declaring Bankruptcy: How an Equipment Valuation Improves the Situation

Posted by Equipment Appraisal Services on Tue, Mar 15, 2016 @ 01:30 PM


Ask any business owner, and they'll tell you that running a business is hard work. When faced with serious financial problems, however, many companies have to make a choice between different types of bankruptcy to get out from underneath the financial burdens of a failing business. Whether the business owner chooses to reorganize under Chapter 11 to try to save the business and turn it around or to completely shut it down under Chapter 7, this type of legal action gives the owner some breathing space to deal with the financial issues while still ensuring that the creditors will also get their fair share of what's left. But what part does equipment appraisals play in the process? Let's find out:

Bankruptcy Alternatives

But before you hire a lawyer and start filling out paperwork, it's important that you consider all the alternatives you have to bankruptcy. One of the first steps to take is to develop a solid set of books for your business, because it will tell you whether or not you need to file bankruptcy or which type you should file. If your accounting has fallen behind because of the problems you've been facing, you'll need to catch it up to ensure you're looking at the right figures. But don't just trust what your tax return says - most tax documents will depreciate your equipment's value on a standardized schedule. A quality equipment appraisal will allow you to determine the exact amount your assets are worth. If they're worth more than you had thought, you may be able to get a line of credit or make some changes to keep your business afloat.

Chapter 11 - Reorganization

If you think that with a little breathing room, you could turn your business around, filing for Chapter 11 could be a good alternative to completely giving up the business. During this type of reorganization process, the business' assets are placed into an estate or trust created by the court, with the business owner having the use of them during the reorganization period. This type of legal set up allows business owners to continue using the equipment for production while still ensuring that the interests of any creditors is also protected by removing legal ownership from the hands of the owner. If you have equipment that is being threatened with repossession which you either have equity in or need to continue production, this action can protect your use of the equipment.

Chapter 7 - Discharge of Debts

If you feel, even after looking at the updated books and machine valuation, that the business is simply not salvageable, a Chapter 7 filing may be the route to take. In this type of action, the business actions are discontinued and a trustee is appointed to ensure the business' assets are liquidated in an orderly fashion to pay any creditors. An accurate machinery valuation helps estimate the value of the machinery assets of your company, helping the trustee determine how much each creditor will receive.

Dealing with bankruptcy is a difficult time for business owners, but it's one that can be made lighter by hiring the right equipment appraiser. If you're still looking for the right company to provide your bankruptcy machine appraisal, please contact us today. At Equipment Appraisal Services, our experienced, certified machinery appraisers are ready to help you document the value of your assets with quality work and a solid methodology.

Tags: bankruptcy, Chapter 11, Chapter 7, Reorganization

What is Allocation of Purchase Price?

Posted by Equipment Appraisal Services on Tue, Mar 08, 2016 @ 10:30 AM


When you buy a business, it's important to get a business valuation to know what you've purchased. One part of that is to help you develop an allocation of purchase price. But what exactly is a purchase price allocation and how does it affect your new business? Here are the basics of purchase price allocation and what it means for your company.

What is Allocation of Purchase Price?

When a business is purchased, the buyer typically pays a negotiated price that consists of both tangible and intangible assets. The intangible assets include things like goodwill, brand recognition, the current market in that sector and the projected future income of the business. Tangible assets are often considered easier to value, but in fact can have a wide range of values. Purchase price allocation involves assigning a certain amount of the business' sale price to the tangible assets. But why is this a common practice?

When a business is sold, new accounts are set up to cover the business loan and other liabilities, accounts receivable, accounts payable and assets. As the backbone of the business' capital, assets play a very important part in determining whether a business is solvent or operating in the red. Because machinery can be a large part of those assets, knowing what it's worth is vital to setting up the accounts properly, with each machine's valuation being recorded so that depreciation can be counted against the machinery as time passes under the new ownership. Even if a machine has been completely depreciated under the former owner, its value is part of what determines the final price of the business, so knowing the actual value of a machine that has been completely depreciated on a standardized depreciation table is vital to having an accurate picture of the transaction.

Because equipment acquisitions and replacement can have a major impact on your business' overhead and overall profitability, it's important to make sure the equipment value is properly calculated. If it's based on the former owner's completely depreciated value but is still used as a vital part of the daily operations at the business, there will be a lower level of assets in the business, making it hard to take advantage of possible business opportunities that come your way, because you may not be able to get enough credit with undervalued machinery. On the opposite side, if you overestimate your machinery's value, you could be overstating your company's assets and putting your business in a risky situation where you're making an investment that you may not have the assets and capital to cover it if it falls through.

One benefit of machine appraisal that is often left unconsidered is the estimated remaining usable life of a machine. When you're acquiring a new business, you don't necessarily know exactly how long a piece of machinery will last. When an equipment appraiser goes over a machine, he or she can estimate its remaining life so that you can depreciate it over the proper period of time and plan ahead for replacement machinery.

Now that you know the importance of allocation of purchase price in determining equipment values for your business, it's time to look at having a machinery valuation performed on your business' assets.

Tags: allocation of assets, allocation of purchase price

16 Reasons for Equipment Appraisals We See Every Day

Posted by Equipment Appraisal Services on Tue, Mar 01, 2016 @ 02:30 PM


When you're busy running a business, it's easy to let equipment appraisals fall by the wayside. But there are times when it's really important to make sure you know exactly what your equipment is worth, and some of them may surprise you. Here are some of the most common reasons we see every day for machinery appraisals.

16 Reasons for Equipment Appraisals We See Every Day

  1. Allocation of Purchase Price: When someone buys a business, they need to know how much of the purchase price went towards the equipment, so they can set up asset records, schedules for depreciation or other records needed.
  2. Bankruptcy: Do you know what kind of valuation you need in a bankruptcy? There are many different valuations used depending on the circumstances and a good equipment appraiser will know which one to use.
  3. Condemnation: When eminent domain is invoked for a property, fair market value must be established for any equipment that is on site. A qualified equipment appraiser will know what type of fair market value should be used in your particular circumstances.
  4. Dissolution of Corporation: When business planning happens, it's easy to ignore what happens if the company is dissolved. An equipment valuation ensures the shareholders get a fair share of the business value.
  5. Dissolution of Partnership: Whether it's retirement, redirecting or just calling it quits, the dissolution of a partnership can be difficult enough before arguing over who gets what.
  6. Dissolution of Marriage: Divorce is almost always messy. Most of the time, it's easier to have a third party determine the value of a business so a fair and equitable price can be determined.
  7. Getting Financing: When it comes to bank financing for the potential purchase of equipment, you need to prove what your business is worth to get a line of credit, and an equipment appraisal will go a long way towards putting that in place.
  8. Insurance Purposes: When your business is paying for insurance, you want to make sure all your equipment is covered for its actual value. If it isn't, you may find yourself on the short end of the stick during an insurance loss.
  9. Loss Settlement: Speaking of insurance, when you do have a loss, can you prove what your equipment was worth? Having documentation available to prove the equipment's value goes a long way in an insurance loss settlement.
  10. Leasing Equipment: When you're leasing equipment there may be a clause that you can buy the equipment at the end.  You will often need to find its value at this point to make a smart decision.
  11. Management Considerations: When should you sell that old equipment and upgrade your production? Is it worth repairing that machine again or is it time to chuck it? Knowing your machinery's value helps with important decisions.
  12. Import and Export Documentation: How do you prove the value of that new machinery from mainland China? An equipment appraisal helps prove what your equipment is actually worth, especially when customs is suspicious of the label with the $5 value on it that your supplier so helpfully wrote down.
  13. Taxation - Income Tax: What do you do when your machinery is used in a high-wear environment and the IRS depreciation tables provide too high a value? An appraisal gives you documentation of your equipment's actual value.
  14. Taxation - Property Tax: Personal property taxes can be a pain, but a high assessment is a seriously unpleasant surprise. A certified machinery valuation helps you fight an inaccurate assessment.
  15. Taxation - Estate and Gift Taxes: When you pass your business on to the next generation, have you accounted for gift or estate taxes? Documenting equipment value helps ensure your legacy won't go to Uncle Sam.
  16. Charitable Contributions: When it's time to make donations, how do you document the value of the equipment you've donated? Documentation of donations is required by the IRS for tangible asset donations that exceed $5,000.

As mentioned previously, all these reasons are ones we see commonly in our business. Have you had the opportunity to have a machinery valuation performed by a qualified equipment appraiser?

Tags: bank financing collateral, allocation of assets, reasons for equipment appraisals