While there are many reasons for machinery and equipment appraisals, the one that comes up most often is to determine collateral value for lenders. Banks and other lending institutions will accept machinery and equipment as collateral for SBA loans, commercial loans and lines of credit. The use of machinery and equipment as personal property collateral can enhance a borrower’s ability to be approved for a loan. Many lenders require an appraisal as a prerequisite to approving a loan. The appraisal, in addition to a business valuation, helps to establish that the business’s capacity (cash flow) to make the loan payments.
Calder Associates has experience in valuating machinery and equipment. We know that neither book value nor an estimate of value is accurate or acceptable for a business transaction or loan. An estimate by the owner may be self-serving, and book value from the balance sheet is a tax formula. Many times, book value is zero when remaining useful life is many years into the future and indicates the asset has a market — and value.
The important thing to remember is the appraisal report must meet USPAP (Uniform Standards of Professional Appraisal Practice) and be performed by an individual with the training, education and experience to develop an opinion of value in a professional and independent manner — preferably certified by a reputable agency, such as the ASA or NEBB Institute. The appraiser must have no agenda other than performing a fair and objective value of the assets in question. The appraiser is only an advocate of the report and can have no interest in the outcome. Remember, there can be no pre-determined value of the equipment, and the fee charged for the report has no bearing in determining the final value involved. With Calder, you can be confident that your appraisal will not be compromised by any conflict of interest. Contact us today to find out how we can help.