Equipment Appraisal Blog | Understanding Machinery Appraisals

When you have a shop full of prime lumber and fine equipment to turn it into a piece of fine craftsmanship, equipment values may be the furthest thing from your mind. But what about when you move from being a hobbyist to a professional and need to get a loan to open your business' doors or purchase more advanced equipment? How do you prove the value of your equipment if it needs to be used for collateral? Unlike vehicles, there's not a handy guide to valuing shop machinery. A woodworking equipment appraisal performed on your equipment is a great way to fill the gap. Here's how it helps you make the most of your assets:

How a Woodworking Equipment Appraisal Helps You Leverage Your Assets

Equipment appraisals provide a better picture of the value of your machinery. Though you may have seen a similar piece of equipment go for a particular amount at a local auction, that may not dictate the actual value. The auctioned equipment may have been of better or lower quality than your machine to begin with. It could have been neglected in maintenance and repairs, which would be reflected in a shorter expected useful lifespan or lower appraised value. The wrong buyers could have been at the auction, resulting in a lower than usual ending bid or a bidding war between a pair of bidders with a sentimental attachment to the machinery. There are many factors that come into play that can affect the value.

Are you basing the value on a tax depreciation table? If you haven't been using the equipment full time or if the machinery is expected to have a longer expected useful lifespan than the depreciation table accounts for, the machinery will often last for quite a while after its depreciated value has reached zero. If you then use the tax documents to verify value, the financial institution you want to work with may decide you don't have sufficient collateral to receive the loan, which can have a serious impact on your business' growth and future performance.

What about when you have an opportunity but aren't sure if the risk is worth it? If your machinery is being heavily used or goes without necessary maintenance or repairs, you may lose your business over the investment. Why? If you are basing the equipment off the value of a depreciation table or used sale price, the actual value may not provide a sufficient cushion from the investment risk. If you make the investment and then need a loan to cover expenses while the investment is being paid off, your financial institution may not agree with your value figures, preventing you from receiving much-needed cash and resulting in a cash flow issue. If your equipment becomes unusable and must be replaced before the investment has paid for itself, that additional expense could also sink your business. Having a quality valuation of your woodworking machinery helps ensure you're basing your decision on solid values.

When you have a solid idea of what your machinery is worth, it's much easier to use those assets to pursue your future plans. A woodworking equipment appraisal is a great tool in that planning.

When it comes to office equipment, most office workers will tell you that it has three phases: working, not working and kind of working. But the truth of the matter is that knowing the office equipment values can help you decide when it's time to retire older equipment in favor of newer models, because it's easier to tell how the equipment impacts your company's assets and equity. Here are some things to consider when looking at an office equipment appraisal:

Office Equipment Appraisal and Your Equity

• One method many business owners use to determine if it's time to get new equipment is the point where the cost for repairs needed to keep the older machinery operational exceeds the cost to pay for new equipment. Unfortunately, by this point your business will have lost most of the equity in the equipment because if you're not willing to pay for additional repairs, people purchasing the equipment will not be willing to pay a pay the additional costs either.
• The first area to consider when your business is considering keeping and repairing old equipment versus purchasing new equipment is what the equipment value is right now. Having a quality machinery and equipment appraisal performed helps you determine the starting point in your decision-making process and helps you support your decision with a standardized logical methodology.
• Once your equipment appraiser provides you with a solid machinery valuation, the next thing to consider is how much longer you can expect the equipment to run reasonably and whether the loss of equity from depreciation over the remaining life is worth waiting to replace the equipment. An office equipment appraisal can also include an estimated remaining useful life calculation, which should help in this situation.
• On the opposite side of that argument, consider whether you're replacing the equipment too quickly and are costing yourself working capital. As an example, if you purchase a new car and drive it off the lot, it immediately loses value. Purchasing a new piece of equipment just to sell it a few months down the road can quickly deplete your equity. You'll want to wait until you can get you money's worth out of selling the used equipment if at all possible.
• Another option is to consider what you can get out of your existing office equipment. If the machine appraiser comes up with a value that makes it worth replacing the machine, that means part of your office upgrades are paid for from the sale of the older equipment. This can help make a great selling point for an upgrade when budgets are being strictly controlled and monitored.
• An additional consideration to bear in mind is whether the new equipment will have features that are not available on the existing equipment that will make your business more productive or will help it keep up with the competition.

By knowing your office machine appraisal value, you're getting a much better idea of where you stand in terms of office performance, continuing costs and equity in assets. Because office machinery is so vital to your business' productivity and continued success, having quality equipment appraisals performed helps you make smart business decisions. If you need to have your office equipment appraised by one of our highly-trained, certified equipment appraisers, please contact us today. At Equipment Appraisal Services, we're always happy to help your business be everything it possibly can be.