Machinery and equipment appraisals are becoming a common request from banks and lenders that are currently lending in today’s environment. Lenders have been able to see the benefits of getting a certified USPAP (Uniform Standards of Professional Appraisal Practice) compliant machinery and equipment appraisal for their business loans.
Historically, lenders would rely on book value or uneducated opinions to place values on these assets. These values do not withstand scrutiny with bank examiners, U.S. Small Business Administration, IRS, attorneys, CPAs, courts and others. In addition, with the possibility of the loans going bad, lenders need to have an accurate estimate on what the machinery and equipment may produce when sold off in a loan-gone-bad situation.
Typically, lenders will order Fair Market Value estimates on the equipment and then apply their internal discount percentage to decide what amount to count as collateral for a loan they are considering to issue to the borrower. Lenders often never see the assets that are being used for the loan collateral due to their busy schedules since banks have downsized leaving the remaining commercial loan officers more to do with less time and resources. Using a third-party, certified machinery and equipment appraiser can go onsite to make sure the collateral exists while providing a estimate of value.