For lenders
Equipment appraisals and business valuations for SBA lenders
Reports built for the credit file: the definitions your policy requires, the premises your loan type needs, and the liquidation math stated, not left to the underwriter.
Equipment
What an equipment report includes
- Fair market value in continued use, orderly liquidation value and forced liquidation value, as engaged.
- Liquidation costs and net recovery, including removal, moving and storage, when the lender requests them.
- An asset schedule with identification, condition and value by premise.
- Leased, financed and third-party items listed and excluded from owned collateral.
- Real property and fixtures identified and kept out of equipment values.
Business
Business valuations for change of ownership
For 7(a) acquisition and partner buyout loans, the business is valued as a going concern, including goodwill. The income, market and asset approaches are considered and reconciled. Equipment and business can be valued in one engagement, under one standard.
Definitions
Fair market value as your policy defines it
When the bank requires it, fair market value is defined as in Revenue Ruling 59-60:
“The price at which the property would change hands between a willing buyer and a willing seller when the former is not under any compulsion to buy and the latter is not under any compulsion to sell, both parties having reasonable knowledge of relevant facts.”
Revenue Ruling 59-60, 1959-1 C.B. 237, section 2.02.
Liquidation premises follow the American Society of Appraisers definitions. Each report quotes the definition used and cites its source.
Scope
Desktop or viewed
A desktop appraisal relies on the borrower's asset list and photos. It suits smaller collateral and renewals when the data is good. A site visit is recommended for larger collateral, older equipment, special-purpose assets and workouts. The report states which was done, who viewed the equipment and when.
Intended users
Intended users and engagement
- The lender is the client. The SBA can be named as an intended user at engagement.
- We work within your order platform and engagement terms.
- Turnaround: desktop 5 to 7 business days; with a site visit 10 to 15 business days. The clock starts when all required information is received.
- We do not appraise any asset or business we are selling, own, have an interest in, or have a business relationship with.
Questions
Common questions
Do you name the SBA as an intended user?
Yes, when the lender asks at engagement. Intended users are fixed in the engagement letter and stated in the report.
Do you report net recovery after liquidation costs?
Yes, when requested. Liquidation values are stated gross, and liquidation costs, removal, moving and storage are then deducted to reach net recovery.
Can you value the equipment and the business together?
Yes. One engagement can cover both, with the equipment values tied to the business valuation.
Have an assignment?
Send the asset list or company name and the intended use. You will get scope, fee and timing back by email, the same business day.