Equipment Appraisal Blog | Understanding Machinery Appraisals

How Investors and Financial Institutions View Collateral

Posted by Equipment Appraisal Services on Mon, Apr 18, 2022 @ 07:00 AM

Machinery and Equipment Appraisals Collateral Financing Asset Types

Whether you work at a conventional bank, leasing company, investment house, or private equity firm, there are several options when it comes to mitigating the risk involved with short and long-term lending. The phrase "collateral" can mean any number of different types of assets that the targeted business has available to pledge as security in a transaction. Depending on the type of company doing the lending or investing, they will identify and independently value the collateral as part of the deal structure.

The following assets are considered the most common collateral:

Tangible Asset Types:

Real Property - Buildings, land, improvements, and certain fixtures

Machinery & Equipment - Typically applied to commercial and industrial business-owned assets. Common examples are construction equipment, trucks, trailers, and machine shops.

Personal Property - Typically identified for individuals and residential properties. Common examples are cash, furniture, household goods, jewelry, and artwork.

Intangible Asset Types: Stocks, bonds, business goodwill, patents, trademarks, customer lists/relationships, established websites, domain names, intellectual property, and trademarks.

From the perspective of conventional banks and leasing companies, tangible assets drive the collateral value assessment when working with businesses or individuals that own a significant amount of real estate and equipment. These organizations understand the overall company value is significantly higher than the sum of the tangible property, however, the ability to “touch and feel” the assets which secure their investment loans and leases brings a higher comfort level.

They are generally in for the long haul with their clients, sticking with them for several years while looking to provide competitive interest rates.

Investment houses, private equity firms, and similar institutions typically take a shorter-term look at the business which creates an opportunity to consider intangible as well as tangible assets when approving and collateralizing transactions. Simply put, overall business value, which combines every asset type into the appraisal equation, is a useful tool for these investors to assess their risk level.

This strategy is logical given the low probability that a significant change in the business will occur when viewing it from a 12-24 month perspective vs. the longer-term bank and leasing company directives.

In summary, collateral is a key component of virtually every investment transaction in the marketplace. Determining the types of assets which will secure these deals depends on the risk profile each company puts into practice. When considering utilizing these types of financial institutions and investment firms, ensure you understand these factors before committing to a business partner.

Tags: bank financing collateral, Machinery & Equipment Appraisals, Tangible Assets, collateral, Intangible Assets

Why Do You Need A Machinery & Equipment Appraisal?

Posted by Equipment Appraisal Services on Mon, Aug 24, 2020 @ 08:00 AM

Importance of machinery & equipment appraisal

Whether your business is expanding or going through a downturn, being purchased or sold, audited or invested in, refinanced or liquidated, it is important to understand the real market value of your tangible assets, specifically the machinery & equipment that work every day behind the scenes.

Obtaining an equipment appraisal from a qualified valuation firm such as Equipment Appraisal Services can provide you with firsthand knowledge of the value of your machinery and what to expect should you wish to buy, sell, refinance or upgrade these types of assets in the resale marketplace. A formal appraisal analysis and report can assist you in any number of ways as you move through the next phases of your company’s development and can be shared with third parties who may be assisting you with these project plans.

Our appraisers can visit your operations facility and perform an on-site personal inspection and discuss your business directly or complete a “desktop” appraisal based on the information you provide to us, including detailed asset listings and photographs.

The experienced appraisers at Equipment Appraisal Services have been completing these types of fully researched valuations for decades and can meet the demands of any machinery & equipment appraisal assignment across all markets & industries. We look forward to the opportunity to work with you as a key component to your ongoing business projects.

Tags: Machinery & Equipment Appraisals, Equipment Appraisal Services, Tangible Assets