Equipment Appraisal Blog | Understanding Machinery Appraisals

Growing with the Building Boom: Construction Contracting Asset Appraisal

Posted by Equipment Appraisal Services on Mon, Aug 05, 2019 @ 08:00 AM


construction contracting

Despite a slight downturn in the early part of this year, construction spending is forecasted to begin climbing again. Is your business positioned to expand operations by buying new equipment, adding new crews or purchasing new software? Securing capital to deal with issues such as this often means getting a business loan. But how do you accurately estimate the value of your business assets to secure that loan or sell in favor of newer or better machinery? A construction contracting asset appraisal can help. Here's how:

Growing with the Building Increase: Construction Contracting Asset Appraisal

Working in construction demands a certain amount of market savvy to understand the cycles the industry moves in. Preparing for those changes often means having a good grasp of the value of your construction equipment assets. Why? As the equipment ages or is used on the job site, it begins to lose value. At the same time, newer, larger projects demand better equipment. It's difficult to go into the negotiating process if you don't know what your current equipment is worth and how it can be used to offset the expense of the replacement equipment.

Expanding your business means that you'll need capital, whether it's to take on new crew, buy new machinery or explore new opportunities. But where is that capital going to come from? Though you can get a business loan, if your business' credit history has had any shaky points, you may not be able to secure the best available rates. This is one area where being able to use the capital tied up in asset value can be beneficial to your company. 

A financial institution that may not be willing to issue a loan or that is charging a higher interest rate may be willing to negotiate if they feel that their interests are being protected. If you can offer substantial collateral on the loan, such as the value of your equipment assets, you're able to bring something more to the table that allows them to make a better offer.

But how do you prove exactly what your machinery is worth so that the bank feels comfortable in negotiating its loan terms with you? You could have an equipment retailer estimate the value of the machinery, but their estimate is going to be based on what their current interests are, so they may not provide you with an accurate assessment of value.

Basing your equipment values on what similar machinery is being sold for in a magazine or online will only provide you with a rough estimate and may not take the condition of the equipment into account. Working with a certified equipment appraiser is the only way to provide your financial institution with equipment values that are based on tested methodologies that will hold up to strong scrutiny in a range of situations.

By having a construction contracting asset appraisal performed on your company's essential equipment, you can use idle equipment as collateral for a loan, make smart decisions about what equipment to keep and what equipment to sell and replace or have documentation estimating the value of your machinery for an insurance claim. Whatever you decide, make sure you're working with a certified equipment appraiser to ensure that you're getting an accurate value for your construction and contracting equipment.

Tags: Construction Contracting