Equipment Appraisal Blog | Understanding Machinery Appraisals

Developing a foundation to be an accredited M&E appraiser can come from many different career paths. Although some candidates start right out of college, having worked in another capacity in the machinery industry can have additional benefits.

Gaining experience as an asset manager in the equipment finance and leasing industry is a common profession that leads to independent valuation work. The credit risks associated with lending and investing need to be leveraged with the ability to better understand the value of the assets being collateralized. Properly estimating value throughout the deal term will lead to better upfront decision-making and future outcomes should the equipment be repossessed or returned in a default or end-of-lease scenario.

Later in their careers, asset managers may decide to work for independent valuation companies or accounting firms with appraisal divisions.

Another parallel career is used equipment sales and remarketing, either as an auctioneer or a machinery dealer specializing in certain industries such as heavy equipment, transportation, and manufacturing. Learning about the secondary market firsthand, where you see real-time used-equipment sales every day, is a great way to develop the skills necessary to become an independent M&E appraiser.

Equipment dealers sell in both retail and wholesale environments, which translates to fair market and orderly liquidation value comparisons. Auctioneers are typically buying and selling in a more distressed setting that lends itself to a forced liquidation value. Companies in these industries often develop databases of historical resale prices that can be used to accurately estimate the value of used equipment.

This is another area where certain individuals working for these companies might decide to focus on valuation more exclusively and strive to become an accredited ASA MTS appraiser.

Anyone working in businesses that have a heavy focus on machinery and equipment, either from a resale or operational perspective, will be able to use their skills to gain a leg up on becoming an independent appraiser. Professional appraisal work is a specialized skill that offers the opportunity to help clients in different scenarios that require an unbiased opinion of value, whether to close transactions or settle disputes.

Having the right background that establishes your credentials goes a long way to becoming a successful ASA MTS appraiser.

If you own a business that has a lot of productive machinery & equipment, consider maximizing its working potential by tapping into its other benefits. Asset ownership offers many benefits, including the ability to convert hard-earned equity into cash. Access to working capital will allow you to invest in other areas of your business, such as expanding operations and upgrading or adding more machinery to meet growth needs.

We all know equipment depreciates over time, unlike land and buildings; however, it will continue to hold significant value over the years if it is well-maintained. If you initially paid cash, or loans have been paid off, even though you have fully depreciated the assets on your books, actual market value can be determined and used as the basis for new working capital that results in a significant cash infusion for your business.

When you begin working with a bank or other financial institution, take the time to develop a detailed listing of all your M&E, while providing access to your original purchase documentation. The most important data to include would be the general description, year, make, model, and serial number/VIN for each item. Specifications such as production capacity, size, length, and tonnage will also be useful.

Keep in mind the bank is investing in you and your company, while taking a lien against the equipment as collateral; therefore, it will be important for them to get comfortable with the transaction and associated risk. Most lenders will approve a certain percentage of Fair Market Value or look at a more conservative liquidation value as the funding level for the loan.

A critical next step will be to engage with an experienced, accredited M&E appraiser who can independently support the value of your assets. They will research the industry and develop opinions of value at various resale levels in the market, while utilizing sources who are involved with the sale of new and used machinery. The lender may allow you to arrange for the appraisal directly or prefer to oversee it themselves. In either situation, you will need to participate throughout the process to ensure the appraiser has the optimal amount of information to best understand the history and status of your assets.

An independent appraisal report will support a reasonable value for all your M&E, so you can get approved for that working capital loan your company needs to continue to grow and be successful today and for years to come.