Equipment Appraisal Blog | Understanding Machinery Appraisals

Planning a Move? Consider a Tangible Personal Property Appraisal

Posted by Equipment Appraisal Services on Mon, Feb 22, 2021 @ 08:00 AM

tangible personal property appraisal before you move

 

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.

Tags: Equipment Appraisal, machinery appraisal, accredited appraisers, tangible personal property

5 Ways an Equipment Appraisal Helps in Getting Financing

Posted by Equipment Appraisal Services on Mon, Nov 30, 2020 @ 08:30 AM

Equipment Appraisal to Secure Financing

 

Whether you are acquiring a new business, expanding your capital asset requirements or restructuring debt, searching for available financing is a critical part of the process. In any of  these cases, if your operation includes machinery & equipment, obtaining a current asset valuation will be an important step. An equipment appraisal will help document your business' assets, adjust the depreciated values on your balance sheet to realistic market data and assist potential lenders in getting your credit approved.

Here are some other benefits of having a current machinery valuation completed for financial service providers and equity investors:

An equipment appraisal provides verification of your company s existing assets. If you have equipment with existing loans & liens associated with them, the lender/investor can use the information provided in the appraisal to determine how much equity you may or may not have accrued. The appraisal also estimates the current market value of the machinery instead of relying on an internal pre-determined depreciation schedule that likely will not show an accurate picture of your business' financial health.

The appraisal supports the value of the machinery you are purchasing or refinancing. When you are considering used equipment, it can be difficult to find an objective source to assist in understanding the marketplace and how it reflects back on your business . An equipment appraiser is an unbiased third  party, with no stake in the larger transaction, and therefore, is relied upon as a credible service provider by all lending institutions.

An equipment valuation can provide this same information to related third parties such as insurance agents and property tax assessors so that you're receiving adequate coverage and not overpaying your share of taxes. This also assists the lending institutions who want to be confident they are covered in the event of any casualty loss.

Financial institutions also work with government lenders such as the Small Business Administration, who have their own set of requirements for approving loans. If you qualify for these beneficial programs, it is important to ensure you can meet these requirements for a small business loan, whether you are just starting out, expanding your company or to help with a temporary cash flow situation.

By keeping these circumstances in mind, having a machinery and equipment appraisal performed by a qualified machinery appraiser will make your financing collateral review process go much more smoothly. Make sure the equipment appraiser is a member of the American Society of Appraisers and is current with the Uniform Standards of Professional Appraisal Practice (USPAP), which requires certified updates every two years.

Tags: Equipment Appraisal, bank loan, financing

How can a bank appraisal help you get more out of your equipment?

Posted by Equipment Appraisal Services on Mon, Feb 26, 2018 @ 09:56 AM

When your business has a significant investment in your equipment assets, knowing the value of those assets and having the ability to leverage that capital can make all the difference when you're trying to grow your company. Though you could simply take an equipment dealer's word on that value, a bank appraisal can provide you with an accurate value that takes a wide range of factors into account. Here's a quick overview of how this type of equipment appraisal helps you leverage your company's machinery assets for better growth.

How can a bank appraisal help you get more out of your equipment?

If you're considering growing or making changes to your business, it's pretty common to pursue bank financing to make those changes. However, with the increased rules and regulations that were put into place following the 2008 recession for business loans, many financial institutions are requiring additional assurance that you have the ability to pay back a loan. One of the areas where this can impact your company's assets is through an appraisal of your company's machinery. How does this type of appraisal work and what other benefits can you reap from the process?

A financial appraisal takes a solid look at your company's assets and their value in the free market. A certified equipment appraiser spends their days reviewing equipment values. This gives them a very specialized skill set and an advanced knowledge of machinery that can be leveraged for your company's growth.

To start, the equipment appraiser will look at the equipment's condition. Because they have extensive experience working with a wide range of equipment, they know what to look for in terms of wear and tear, potential abuse issues and overall value on the open market. This also makes them very good at noticing potential issues with your equipment that may have otherwise been missed. By catching these issues early, you can make repairs or additional maintenance before small, easy problems become big, expensive ones.

Another area where you can see strong benefits for your company is by knowing the right value for your equipment. Most companies use tax-agency-based depreciation tables to determine what equipment is actually worth. However, that doesn't mean that the value from those tables is correct. Almost every company has a piece or two of ancient equipment that is still providing exceptional service long after it was declared worthless by the depreciation tables, whether it's an aging table saw or an old truck that keeps on rolling. At the same time, many companies have purchased equipment that has failed prematurely, either through abuse or excessive use, or through poor engineering and design. These same depreciation tables show that equipment as having value long after it has become virtually worthless.

Knowing what your equipment is worth through a solid bank appraisal allows you to leverage that equipment to grow your company into a promising new future. But don't trust just anyone who knows a little about equipment values to give you an accurate value. Certified equipment appraisers use tested methodologies that hold up well in virtually all circles, whether financial, legal, insurance or tax concerns are under scrutiny. Make sure you work with a certified appraiser to ensure the money you spend on an appraisal provides you with the most accurate results available.

Tags: Equipment Appraisal, bank appraisal

Dealing with a Business Loss: Retrospective Appraisals

Posted by Equipment Appraisal Services on Tue, Jan 23, 2018 @ 02:34 PM

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Your workshop catches fire and burns the equipment that was stored or used within. A hurricane floods your office and destroys both the maintenance records and the vehicles that were kept on site. A vandal breaks in and causes irreparable damage to your machinery over a late night or long weekend. Whatever situation you find yourself in, one of the thoughts that may raise your stress levels is how to prove the value to your insurance company. Here's a look at how retrospective appraisals can help in these difficult circumstances.

Dealing with a Business Loss: Retrospective Appraisals

How can an appraiser determine the value of equipment that has been significantly damaged? Though some of the process may involve some level of educated estimation, most of it is grounded solidly in appraisal practices and methods. Some information will be easily obtained, while other information will require careful study of what's left and any paperwork that is left after a disaster.

Let's take the example of a cargo van that has been burned in a warehouse fire and had significant damage due to the heat involved. Most business owners and equipment operators, even many mechanics, would only see the burned shell of the van. Fortunately, equipment appraisers take a different view of the machinery they're appraising.

To start, the appraiser will work with any paperwork and information that is available.  The original purchase paperwork, maintenance logs, receipts from repairs: all these papers paint a picture of what kind of van it was, the care it was given over the years and possibly a record of how many miles it had on it at the time of the loss. This information allows the appraiser to calculate the cargo van's value in general terms, based on the market conditions and demand for that type of vehicle.

But what if the van had been poorly used over the years? What if there was unrepaired body damage or significant problems with its mechanical systems due to being neglected or abused? On the other hand, what if it had much lower miles than most vehicles of that age and was maintained in impeccable condition? What if the business had added machinery or options to the vehicle that would increase its overall value? These are all aspects the equipment appraiser must take into account when calculating the value of a piece of equipment after a loss.

Another area to consider is when the damage took place. If the van was stored at a remote site and the damage was discovered months after the fact, how do you determine value? What if the bottom has fallen out of the van market in the intervening weeks and months? Should the van be appraised at the value it held when the damage was discovered or at the estimated time of the the loss? An equipment appraiser can retroactively value the machinery to the loss date using verified, tested appraisal methods.

Having to deal with a business loss is stressful, but having the option of getting retrospective appraisals performed on damaged equipment helps reduce the load. Whether you're claiming a loss on tax returns or pursuing compensation from your insurance company for the damage, a retrospective appraisal can help your business get back on its feet faster. Make sure you work with certified equipment appraisers, as the methodologies they use will hold up well against scrutiny in court, insurance and tax agency circles.

Tags: Equipment Appraisal, retrospective appraisals

How do Standards of Value Impact Your Equipment's Appraisal?

Posted by Equipment Appraisal Services on Tue, Dec 19, 2017 @ 01:40 PM

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When your equipment is a large part of your business assets, the value of that equipment can strongly impact your bottom line. When equipment is appraised, standards of value are used to help calculate that value. But what are these standards, how can they impact your equipment's value and why are they used in particular situations? Here's a quick overview to help you get started in understanding this appraisal concept.

How do Standards of Value Impact Your Equipment's Appraisal?

Standards of valuation have been developed over the years to ensure that machinery is being appraised in a way that provides consistent calculations and results. Because of this history, an appraised value from a certified equipment valuation specialist holds up well to strong scrutiny in a wide range of areas. However, values are calculated differently depending on the situation.

A company that is undergoing bankruptcy may have their equipment appraised at liquidation value, as it's expected that the equipment will need to be sold quickly to pay off any debts. Investment value refers to the machine's ability to provide business income, such as a welding robot on a factory floor. 

One of the most common types of equipment appraisal that is performed is fair market value. It's such a wide-spread appraisal type that it's required in some specific legal situations, such as a divorce or litigation involving the dissolution of a partnership. In calculating this value, the appraiser looks at a wide range of aspects including the equipment itself, the conditions in the market where it is used and similar aspects. As an example, a drill for oil exploration will have a much higher market value during an oil boom than when oil prices fall and exploration is at a minimum.

These different appraisal types can drastically impact your equipment's appraised value. Fair market value assumes that you can wait a while for the right buyer who is willing to pay what the machinery is worth, while liquidation value may be much lower to assure a fast sale. Different values may be determined for large or difficult to move equipment based on whether the machinery is sold in place or to be moved, due to the high cost of moving it to a new location.

The different values are impacted by a wide range of factors, and the final appraised value may not match what you've been told by a local machinery dealer. Why? If a machinery dealer offers you a higher price for your equipment than what is calculated, it may be due to a push to move their new equipment, allowing them to make a higher offer on older machinery to get their new equipment moved.

On the other hand, they may offer you a much lower price to convince you that your machinery is virtually worthless to help encourage you to replace it with equipment that has more equity. Whatever reason for the disparity, a certified equipment appraiser has been taught specific methodologies during the certification process that have been proven to hold up well in legal, financial, insurance and tax agency circles.

By knowing how standards of value affect your equipment's reported value, you can get a deeper understanding of how the valuation process works and how different situations and conditions can impact that value. This helps you get a better comprehension of appraisal reports, allowing you to better leverage your equipment value to your company's benefit.

Tags: Equipment Appraisal, standards of value, ASA accredited appraiser