Equipment Appraisal Blog | Understanding Machinery Appraisals

Someone once advised me that when you're in the restaurant business, change is inevitable. This was originally intended to mean the frequent need to shift suppliers, update your menu, and constantly train staff, among other things. Today it means a whole lot more than that, with the goal of survival and long-term profitability at the forefront for many restaurant owners due to the COVID pandemic. Kitchen, dining, and bar equipment, commonly referred to as FF&E (furniture, fixtures, and equipment) can assist restaurant owners with obtaining new capital, restructuring loans, and help expand a growing business.

A restaurant FF&E appraisal will support the value needed for these situations

Restaurant appraisals are commonly requested by banks and other lending institutions for owners, potential buyers and sellers when assessing loan amounts or restructuring existing debt. The value of your overall restaurant business probably has a small amount of that value on the books associated with the FF&E. As long as your equipment has been well maintained and is in good condition, an updated appraisal will most likely support an increase to the tangible asset component of your operation, and will, in turn, increase the overall value of your restaurant.

Leveraging these assets in conjunction with the value of your intangible goodwill can maximize the amount of capital you may be able to borrow in any of these financial situations.

When you are ready to get an FF&E appraisal for your restaurant, always seek out an experienced, accredited equipment appraiser, as their credibility, and that of the valuation firm they represent, goes a long way to supporting the concluded values estimated in the report. Most banks and lending institutions will require a fully documented and researched analysis as part of the valuation effort.

You can ask the appraiser to quote the work either as a visual on-site inspection or as a “desktop” appraisal depending on the level of data you have available for review and your cost budget. You should request the valuation be under a Fair Market Value premise, assuming the restaurant remains in operation, and potentially a more conservative orderly liquidation value if the bank is looking for a “best case, worst case” scenario.

By having a restaurant equipment appraisal performed on your associated FF&E, you can also better determine the overall value of your business if you decide to sell.

When you are ready to move forward on an appraisal of your restaurant FF&E, contact us at Equipment Appraisal Services. Our fully accredited and experienced appraisers are well prepared to provide you with everything you need.

Your oilfield machinery is a primary driver behind the success of your business. You haven’t considered how much your assets are worth in quite some time, however, you now need to update your insurance coverage, obtain refinancing, buy or sell some equipment or even purchase a new company to keep up with growth requirements. Understanding the current market value of your oil and gas equipment is critical for all these possibilities. Obtaining an independent valuation from an experienced accredited appraiser is equally important to you and the other parties involved in the transaction.

Factors Considered in a Fair Market Value of Oil and Gas Equipment

• Physical Deterioration: An appraiser will review the equipment, taking note of its physical condition. The old adage about never judging a book by its cover applies well to machinery appraisals for oilfield equipment. Even if an oil rig looks old and shows visible wear and tear, it is not necessarily an indication of low value. Appraisers will review the history of the equipment with you before making a value determination. Machinery that has been well maintained, with components replaced as needed, regardless of age, will likely still have significant value.
• Replacement Cost: An appraiser will estimate how much it would cost to purchase, for example, an equivalent rig, mud pump, or service truck new, and then deduct from this cost-based typical levels of market depreciation over time.
• Useful life: The appraiser may estimate the useful life of the machinery by reviewing the age, physical condition, and depreciation of equipment. Effective age is typically weighed more than chronological age if the equipment has been well maintained over its life.
• Market Data: The marketplace is where all relevant information is found during the appraisal process. We will look at recent sales and listings while gathering opinions of value from third parties who buy and sell new and used equipment every day.

Appraisers will factor all of these variables into the analysis and subjectively estimate value based on their opinion of the reliability of the data. The appraisal report will summarize this process, explain the criteria under which fair market value was determined, and provide the sources relied upon to support these conclusions.

If you are considering any business plans in the immediate or longer-term future where the value of your oilfield assets is a factor in the decision making, it is well worth the time and expense to engage an independent appraisal company to complete the task. It is important to hire an appraiser who is unbiased and experienced in the valuation of these types of assets. When your business is on the line, never settle for an appraiser who doesn’t have the right credentials or may have an interest beyond appraising your machinery. Equipment Appraisal Services is the perfect place to begin your search.

Whether your business is moving up a floor, downtown, or to a newly renovated home office, your tangible business assets should be accounted for during the process. Personal property appraisals can protect your owned equipment from any loss, damage, or liability resulting from the relocation effort. Learn what these appraisals are and why you should have an accredited equipment appraiser perform a tangible personal property valuation before this important step.

What is Tangible Personal Property?

Originally a tax term, "tangible personal property" refers to any piece of property that can be picked up and moved. “FF&E” is a common catchall term to describe many types of personal property. This acronym stands for furniture, fixtures & equipment and includes office furniture, (filing cabinets, chairs, desks, credenzas), office business equipment (printers, scanners, copiers, computers, servers and related IT assets), and other related assets. The fixtures component pertains to cabinetry, shelving, HVAC equipment, and similar items which, although installed on the premises, might be removable and worth relocating to a new facility. Appraising tangible personal property can also assist your business with insurance, property tax, and internal capitalization for accounting purposes.

While there are several reasons for hiring an equipment appraiser, relocation is an often-overlooked reason to have your tangible business property values updated.

Potential Claims & Uses

If you are working with a moving company, they probably offer liability coverage to protect themselves if they damage or lose your items during the move. One of the mistakes you can potentially make is trusting that this coverage will be sufficient to protect your property. This type of insurance typically covers claims by weight or assessed value, which is vague at best and not for your benefit as much as the movers. They will usually pay only a fraction of the real value of these assets if the liability is on their end. You need to consider your own interests in this scenario. There is also the potential for physical loss liability claims if someone is injured during the move and disruption costs to your business. For these reasons, we recommend obtaining an appraisal of your FF&E personal property so there is a clear understanding of value before your move.

These valuations can be completed by machinery & equipment and personal property appraisers. Personal property is considered a sub-class of machinery & equipment and, therefore, many equipment appraisers have experience with these types of assets.

Once you have the appraisal report, reach out to your business insurance provider and discuss covering your property for the purpose of the move. You can also consider using the report for longer-term insurance needs and other reasons such as property tax and accounting purposes.

Before they can cover a claim, insurance companies typically ask for an independent opinion of value for your FF&E. Take the extra step to protect your business assets with a tangible personal property FF&E appraisal. Even if nothing goes wrong in the move, you will have peace of mind knowing that vital business assets have been appraised at fair market value.

You have spent years building up your business, invested wisely, accounted for risk, and sacrificed a lot to build your company into what it is today. You have groomed the next generation of your family and employees to one day take over the legacy you have created.

If you own a significant amount of machinery & equipment as part of your business, have you accounted for gift or estate taxes in your planning? With the potential liability of these taxes, failing to plan for them can leave your legacy open to unnecessary costs. You can avoid this pitfall by obtaining an accredited machinery & equipment appraisal with signed certification that attests to an objective, fair opinion of value.

Whether you are planning on handing down the business or just need to update the current value of your tangible machinery assets for internal or external purposes, a documented appraisal report will satisfy several needs. It can assist in limiting any disputes in value by those taking over the business, where one family member, partner, or vested employee thinks they are getting more or less than another. If your estate and it’s associated company is being divided up between several people, an accredited equipment appraisal will help determine how all the assets can be equally divided. If you are planning on using a living trust, it also has the advantage of keeping your loved ones out of probate and will keep your accounting and wealth private.

Making Arrangements for Estate and Gift Taxes

When you have a supportable, independent equipment appraisal report in hand, you can then estimate how much these burdensome taxes may be and make allowances for them either through life insurance, business insurance, or by leaving a certain amount of equity available to cover these estate costs.

If you are thinking of estimating these values internally by simply looking for similar equipment online or finding a broker, auctioneer, or other unaccredited third parties to estimate value, you risk not having an objective, reliable report. This may cause concern by those auditing your business for estate tax purposes.

Make sure you employ accredited valuation experts who are members of the American Society of Appraisers (ASA). This ensures they follow the protocols of providing objective, supportable reports that will hold up in any business situation.

Did you know that over one-third of businesses that go through a disaster or property loss never open their doors again? This is primarily due to insufficient insurance or the inability to prove the value of equipment and other assets lost in the event. How do you protect your business against this kind of unexpected problem? An accredited equipment appraisal with a signed certification can go a long way towards ensuring you have adequate insurance to protect against a loss and to support equipment values during an insurance loss settlement.

Involved in an Insurance Loss Claim for Machinery & Equipment? Accredited Appraisals Will Assist in the Process.

Determining Insurance Coverage

When you are buying business insurance, you want to make sure all your assets, including machinery & equipment, are being covered for their current market or replacement cost value. Many people rely on tax return depreciation as a quick guide to appraising it, but the actual value may be much different than what standard accounting depreciation allows.

If the machinery & equipment is overvalued, you may be paying too much for premiums and will not recover the full amount you have estimated during a loss claim. If the assets are undervalued, the insurance company may have concerns that you did not pay for sufficient coverage and not be willing to pay you a fair value for casualty claims. An accredited machinery & equipment appraisal can go a long way to providing proof of value for your assets and assist in determining how much coverage you need.

Dealing with a Loss

When your business suffers an actual casualty loss, during this stressful time, you will want to reach a fair settlement as quickly as possible, to avoid business interruption. Can you prove what your equipment was actually worth? Having support documentation completed by an accredited machinery & equipment appraiser with signed certification helps to prove the real market value and can be utilized in an insurance settlement. The valuation is an objective, unbiased, defendable report that you can present to the insurance company during the claim process.

Even if you have not had a report completed before the loss, appraisers can retrospectively value the machinery & equipment as of the casualty loss date. An accredited equipment appraiser will sign a certification attesting to the value as of the prior loss date. They have the experience and expertise to research the market and make the appropriate adjustments to reflect market value as of the effective date. Make sure the firm employs accredited valuation experts who are members of the American Society of Appraisers (ASA). This ensures they follow the protocols of providing objective, supportable reports that will hold up in any settlement negotiation.