Machinery and Equipment Appraisal
Machinery and equipment appraisal for lenders
M&E and FF&E appraisals for collateral lending, acquisitions, insurance and asset planning. Fair market value, orderly liquidation value and forced liquidation value, in a report built for credit review.
What is appraised
Equipment we value
Every asset is identified by manufacturer, model, serial number, year, capacity and condition, then grouped the way a lender reads collateral.
- Production machinery and complete process lines
- Motor control centers, process piping and installation, where the premise includes them
- Material handling: forklifts, cranes, conveyors and racking
- Rolling stock: trucks, trailers and yard equipment
- Construction and heavy equipment
- Shop tools, maintenance equipment and laboratory equipment
- Furniture, fixtures and equipment (FF&E) for offices, restaurants, clinics and retail
Premises of value
The value that fits the loan
The premise of value is agreed with the client in writing before work starts. A lender relying on liquidation needs a liquidation premise. An acquisition lender may need the value of the equipment installed and working.
| Premise | What it assumes | Typical use |
|---|---|---|
| Fair market value in continued use | Equipment stays installed and working in an operating business. Installation is included. | Acquisition and SBA loans, purchase price allocation |
| Orderly liquidation value | Sold as-is, where-is, with a reasonable time to find buyers. Buyer removes the equipment. Stated gross, before sale costs. | Asset-based lending, collateral monitoring |
| Forced liquidation value | Sold quickly at a properly advertised public auction. Stated gross, before sale costs. | Downside case, workout and default planning |
Method
How the value is reached
All three approaches to value are considered. Each report explains which were applied and why.
- Sales comparison. Recent sales and asking prices for comparable equipment, adjusted for age, condition, capacity, location, removal cost and level of trade. Every adjustment is documented.
- Cost approach. Replacement cost new, less physical deterioration, functional obsolescence and economic obsolescence, each deducted in sequence and supported.
- Income approach. Considered for leased equipment, or as a test of whether the business earnings support the value of the equipment.
Scope
Desktop or site visit
Many assignments are desktop appraisals, based on the owner's asset list, data-plate photographs and maintenance records. A desktop scope is permitted when the result is not misleading and the scope is disclosed in the report.
When the lender or the collateral calls for it, the equipment is viewed on site. Condition reflects visual observation only. Equipment is not operated or tested.
To start, send: an asset list with make, model, year and serial number; current photographs of each item and its data plate; hours or mileage; recent repairs or rebuilds; and the name of the lender and the intended use.
Questions
Equipment appraisal questions
What does a machinery and equipment appraisal cost?
The fee depends on the number of assets, the premises of value requested, and whether the work is desktop or includes a site visit. Send the asset list and intended use for a fixed quote.
How long does an equipment appraisal take?
Most desktop assignments are delivered within one to two weeks of receiving a complete asset list and photographs. Larger plants and site visits take longer. The delivery date is set in the engagement letter.
Which premise of value will my lender want?
Asset-based lenders usually ask for orderly liquidation value, and often forced liquidation value as well. Acquisition and SBA lenders frequently add fair market value in continued use. The lender sets the intended use, so confirm with them before the engagement is signed.
Is the equipment operated or tested?
No. Condition is based on visual observation and the owner's records. Operating or testing machinery is outside the scope. If functional testing matters to the lender, a qualified third-party operator should be engaged.
Do you search title or liens on the equipment?
No. Title, UCC and lien searches are not part of the appraisal. Equipment is valued as if free and clear, and ownership is not certified.
What types of equipment do you appraise?
Production machinery and process lines, material handling and forklifts, trucks and trailers, construction and yard equipment, shop tools, laboratory equipment, and furniture, fixtures and equipment for offices, restaurants and other businesses.
Have an assignment?
Send the asset list or company name and the intended use. You will get scope, fee and timing back by email.