Posts Tagged ‘Machinery and equipment appraisal’
Small Business Lending Still Considered Sluggish, According to Federal Reserve
Despite recent indications that banks were beginning to lend to small businesses again, which we discussed in a recent blog post, at a recent small-business forum, the Federal Reserve chairman, Ben Bernanke, indicated that he was still concerned about the lack of small-business lending.
A recent New York Times article notes that experts are unsure why small-business lending has continued to decrease. Bernanke was quoted as asking: “How much of this reduction has been driven by weaker demand for loans from small businesses, how much by a deterioration in the financial condition of small businesses during the economic downturn, and how much by restricted credit availability?” He then went on to say that it was likely all three were contributing factors.
The article posits that small business owners believe that lenders are not lending to creditworthy businesses because of heightened paranoia following the economic downturn, while economists cite potential borrowers’ weak economic fundamentals as the reason for sluggish lending.
According the article, lenders say they have returned to basics in terms of lending fundamentals after being too lax, which means conducting more careful due diligence, including taking into account businesses’ collateral and cash flows. Understanding what lenders are looking for and how a certified appraisal fits into lending criteria can help business owners find the funds they need to grow.
By: Present Value
Additional Reading
Glimmers of Hope in Small-Business Lending
5 Cs of Lending (How Appraisal Fits in Even Though It Doesn’t Start with C)
Lenders Turn to Present Value LLC for Pre-Loan Due Diligence
Common Definitions of Value for Machinery and Technical Assets
We talk a lot about the importance of knowing the value of your machinery and equipment, but sometimes the language used in the industry can be confusing. It’s also important that you are able to understand what all of the terms mean when you engage a machinery and equipment appraiser. Below are some common definitions for different appraisal values as they apply to machinery and equipment, as defined by the American Society of Appraisers.
Fair Market Value is the estimated amount, expressed in terms of money, that may reasonably be expected for a property in an exchange between a willing buyer and a willing seller, with equity to both, neither under any compulsion to buy or sell, and both fully aware of all relevant facts, as of a specific date.
Fair Market Value – Removal is the estimated amount, expressed in terms of money, that may reasonably be expected for an item of property in an exchange between a willing buyer and a willing seller, with equity to both, neither under any compulsion to buy or sell and both fully aware of all relevant facts, considering removal of the property to another location, as of a specific date.
Fair Market Value in Continued Use is the estimated amount, expressed in terms of money, that may reasonably be expected for a property in an exchange between a willing buyer and a willing seller, with equity to both, neither under any compulsion to buy or sell, and both fully aware of all relevant facts, including installation, as of a specific date and assuming that the business earnings support the value reported. This amount includes all normal direct and indirect costs, such as installation and other assemblage costs to make the property fully operational.
Fair Market Value – Installed is the estimated amount, expressed in terms of money, that may reasonably be expected for an installed property in an exchange between a willing buyer and a willing seller, with equity to both, neither under any compulsion to buy or sell, and both fully aware of all relevant facts, including installation, as of a specific date. This amount includes all normal direct and indirect costs, such as installation and other assemblage costs, necessary to make the property fully operational.
Orderly Liquidation Value is the estimated gross amount, expressed in terms of money, that could be typically realized from a liquidation sale, given a reasonable period of time to find a purchaser (or purchasers), with the seller being compelled to sell on an as-is, where-is basis, as of a specific date.
Forced Liquidation Value is the estimated gross amount, expressed in terms of money, that could typically be realized from a properly advertised and conducted public auction, with the seller being compelled to sell with a sense of immediacy on an “as is,” “where is” basis, as of a specific date.
Liquidation Value in Place is the estimated gross amount, expressed in terms of money, that could typically be realized from a failed facility, assuming that the entire facility would be sold intact with a limited time to complete the sale, as of a specific date.
Salvage Value is the estimated amount, expressed in terms of money, that may be expected for the whole property or a component of the whole property that is retired from service for possible use elsewhere, as of a specific date.
Scrap Value is the estimated amount, expressed in terms of money, that could be realized for the property if it were sold for its material content, not for a productive use, as of a specific date.
Insurance Cost New is the replacement or reproduction cost new as defined in the insurance policy less the cost new of the items specifically excluded in the policy, as of a specific date.
Insurable Value Depreciated is the insurance replacement or reproduction cost new less accrued depreciation considered for insurance purposes, as defined in the insurance policy or other agreements, as of a specific date.
Present Value is always available to answer any other appraisal questions or needs that you may have. Please feel free to contact us.
By: Present Value
Additional Reading:
Know the Value of Your Machinery and Equipment Before an Auction
Case Study: Desktop Equipment Appraisal
Present Value LLC worked on an international project involving equipment being purchased from the United States and delivered to two locations in South America: Brazil and Chile. Due to time constraints, the client requested we perform a desktop appraisal.
Once the client provided Present Value the necessary details, photos, and information on the equipment, we conducted all necessary research and developed the appraisal report. The client was very happy with the appraisal because they got the certified report they needed in the timeframe required.
Because the machinery and equipment appraiser does not visit the site of the equipment being appraised, a desktop machinery and equipment appraisal requires the client to provide the appraiser with all the necessary information for each of the items to be appraised, such as photos, make, model, hours, mileage, years, and original cost. The appraiser then performs an appraisal from his or her desk, as the name implies, based on all the information provided by the client.
By: Present Value
Additional Reading
Common Types of Appraisal Reports
Manufacturing Operators and Lenders Seek Alternatives to Remain Viable
It may come as a surprise to many people that manufacturing is still the largest industry contributing to the United States gross domestic product. According to government numbers, manufacturing employs approximately 16.7 million workers, meaning that it is still an industry that needs attention. The size of industrial production and significance in the U.S. economy, coupled with the industry’s stagnancy and declining growth, presents a conundrum for companies in these industries and lenders in this sector.
It’s no secret that manufacturing has been in decline for many years due cheaper resource alternatives in foreign markets. The Federal Reserve reported that for February industrial production overall increased by 0.1% following a gain of 0.9% in January. Manufacturing output decreased by 0.2%. While markets other than manufacturing showed increases, they were slight.
Competitive pressures from outside the U.S. will force manufacturers either to develop greater production and financial efficiencies or shut down operations. As a result of the continual declines in manufacturing, investment and lending in this area will likely remain weak. As manufacturing companies downsize or close their doors, lenders operating in this area will need to determine other ways to recoup some of their existing investments, including selling off machinery and equipment.
Whether you need to know the fair market value, orderly liquidation value, and/or forced liquidation value of your equipment, the professionals at Present Value LLC can provide you with a certified equipment appraisal report in a timely manner at a competitive cost.
By: Present Value
Know the Value of Your Machinery and Equipment Before an Auction
Case Study: International Medical Device Manufacturer
In late 2009 and into 2010, Present Value LLC was engaged by a bank to perform a certified machinery and equipment appraisal and an inventory appraisal for an international medical devices manufacturer. The bank called for the appraisal in order to confirm the company’s assets as part of its pre-loan due diligence.
Present Value LLC was asked to determine the orderly liquidation and forced liquidation values for the equipment and a portion of the inventory for the company. The machinery and equipment appraisals took place at two site locations. There were more than 500 capital items and more than 1,000 support items to be appraised. The inventory appraisal included a sampling of more than 20,000 products and goods the company currently had in their inventory.
Present Value LLC was asked to perform this in half the normal timeframe because of the time constraints of the loan. We were able to deliver the report on time and to the satisfaction of the client.
By: Present Value
Additional Reading:
Location, Location, Location
One of the things an appraiser has to take into consideration when determining the value of a piece of equipment is its location. Each state is governed by its own set of laws that can affect the worth of a piece of machinery or equipment.
Take California, for example, where Present Value has an office. In California, the Environmental Protection Agency (EPA) has placed stringent laws on construction equipment emissions. The full set of regulations and standards can be found here. If a piece of used machinery doesn’t have the proper upgrades required to make it compliant with those laws, a buyer knows that he’ll be responsible for the investment required to make it compliant, and the equipment, therefore, may be worth less. The same piece of equipment in another state that doesn’t have the same emissions laws will not need the same upgrades and could, therefore, have a higher value.
Keep in mind, when choosing an appraiser, the importance of working with a company that understands the complexities involved in determining the value of a piece of machinery or equipment.
By: Present Value
Present Value: More than an Appraisal Firm
Following up on our press release that went out on Tuesday, December 8, 2009, we’d like to focus a little bit more on some of the characteristics that make Present Value a unique full-service appraisal firm.
While lenders and business owners have many choices when it comes to finding an appraisal company, at Present Value, we pride ourselves on being more than just a company that provides appraisals: we act as a trusted resource for lenders and business owners. We can act as consultants to help guide our clients as they make crucial business decisions, whether it be a lender, looking to conduct pre-loan due diligence or auction assets from a loan default, or a business owner, looking to obtain financing or make an acquisition.
In addition to providing appraisal services, Present Value has the expertise and experience to orchestrate other aspects of these deals. The strength of our services comes from the partnerships that we have developed all across the country. We have the capabilities to bring the right people to the table for whatever our clients’ needs may be, such as auctioneer services or brokerage services. We aim to be problem-solvers for each and every one of our clients, helping them make well-informed business decisions.
Present Value prides itself on its turnkey service offerings, and Present Value is happy to act as a resource for its clients as they cope with past mistakes and look toward improving their processes. Our network of professionals will always deliver the highest quality products, backed by a team of experts in their individual market segments.
By: Present Value
What We Appraised on Our Summer Vacation
We have written a number of blog posts on machinery and equipment appraisals, including What’s It Worth? and Certified Machinery and Equipment Appraisal. We have talked about the complexities of appraisals for custom-made equipment, such as dies, molds, or custom machinery, and the importance of working with an experienced appraisal company to ensure that you know the value of all your machinery and equipment.
Recently at Present Value, we have worked on some fascinating appraisal projects that we thought might of interest to our readers and also show the breadth of businesses that we work with on a daily basis.
The first project of interest was a radiology clinic, where we appraised the various X-RAY, CAT-scan, and MRI machines that comprise the assets of the business. Another cool project was at a construction company. In this case, we appraised all of the large earth-moving equipment – backhoes, front-end loaders, and dump trucks – and smaller equipment like Bobcats. One of the most fun projects was for a movie theater company that had a dozen theaters and one IMAX theater that we appraised.
Although these projects varied widely in scope and by industry, they demonstrate that understanding the value of machinery and equipment assets are of paramount importance to any business.
By: Present Value
Article for the NEBBI Newsletter
Chris Kinzie and Chris Spinelli of Present Value had an article featured in the latest National Equipment and Business Builders Institute (NEBBI) newsletter. The NEBBI is an international organization that trains and certifies certified machinery and equipment appraisers to perform appraisals that comply with USPAP standards, and Present Value is proud to be an NEBBI member. NEBBI members share resources and information, cross sell, and network, all in an effort to improve their individual businesses and the machinery and equipment appraisal industry as a whole.
In Present Value’s article, Kinzie and Spinelli discuss the company’s evolution from strictly a real estate appraisal company, to a more diversified company that offers a full complement of appraisal services, including machinery and equipment appraisals. They share with the NEBBI members some tips about creating a business plan, creating a business identity, and creating an effective marketing plan. The full article follows:
The Successful Partnership Between Chris Kinzie, CMEA, San Diego, CA and Chris Spinelli, CMEA Newton, MA
Becoming a CMEA has been a huge benefit to our business. Our background is in real estate appraising and many years ago we wanted to diversify our business into other areas of appraising. As members of the NEBBI we have some of the best resources at our fingertips. We have this incredible forum to exchange information, network, cross sell, and grow. We’ve worked with several other members on joint ventures, included several more on individual assignments, all the while watching the impact on our bottom line increase. It wasn’t a fast process for us and we had to learn our in and outs as any other business. Our hope is that our insight in this article might benefit you and your situations. We thought this article would be good to focus information toward newer members getting their business off the ground or others who might be struggling to get things going. It benefits us all when more of us are doing better.
One of the best places to start when reworking your current situation or just new in the business is to “form a plan.” Sit down and write out a simple business plan which would include what you want to do with this designation and education, research your competition, research the marketplace, who would be your potential clients, decide where you want to specialize (this is an important one), set your time goals, set your pricing for services, financial goals (short-term, long-term), create a budget for your business infrastructure and your marketing.
Create an identity for yourself in this business. It gives you focus and credibility, which is crucial to success. You need to stand out in some way from the rest. One way is to specialize in a particular field of M&E appraising or consulting, another might be to offer a boutique of services. Pull from your background, your interests, or your former career contacts.
Marketing is by far the hardest thing to grasp in business, especially if you’re working the business and your marketing at the same time. We’ve discovered the more personal the interaction with a potential client the greater the chances for turning a lead into a job in a shorter timeframe. People need to know who you are and what you do. People especially listen more when you have something to offer rather than something to sell. Don’t sell someone your service, offer them help. A great way to get in front of people is join a networking group … join a few. It gives you a voice, adds credibility, and provides a new sphere of influence that will grow. You might have to visit a few but when you find the right one it can do wonders. If you don’t know where to start try www.meetup.com.
Another source for leads is your own accountant, CPA, or tax attorney. They may not give you business but they’re a resource to interview and show you the inside track of how they think and where there may be a need. Talk to everyone! If you have a fear of speaking in front of people or making presentations, one resource to work on is www.toastmasters.org.
Follow up, follow up, follow up! If you do a letter campaign, phone campaign, or any other type of marketing you had better follow up on those leads. Be consistent, dedicate time, and keep in contact. If you’re not good at marketing, join forces with someone who is.
So who needs you? Many lenders have approved lists but not like residential appraisers are used too. You might get a call from the lender or they may make the borrower find you. The commercial lending department is a good place to start for the decision maker. From our experience it doesn’t matter which appraisal discipline you work in, typically it comes down to pricing and turn-around time who gets the job. With regard to attorneys and accountants, we’ve found it really depends on their clientele. Most areas have a book of lists, which most business journals have. This has been a good resource to find more about the local and regional leaders in industries. The larger the company the more complex and diverse the needs are for your services; if you’re targeting large corporations you may be looking at multiple decision makers and multiple streams of income.
We hope some of the ideas that have helped us be more successful will help you. Be good and remember to be honorable and upfront in all that you do.
By: Present Value
Asset Verification
Oftentimes as part of the operation of their businesses, business owners will secure financing or investors to support the purchase of machinery and equipment. Investors and lenders, who have their money tied up in a business, want to and need to know where and how their money is being used.
While it is of course necessary to know the value of the said assets, sometimes investors simply want to ensure that their investment is being used in the manner that the business owner has reported with regard to machinery and equipment assets. Asset verification can be used to determine that the physical assets of a business exist. For a construction business, this could be verifying that there are three backhoes, five dump trucks, eight Bobcats, etc. For a private oral surgeon’s office, it could be one x-ray machine, four dental sinks, four dental chairs, etc.
In a previous post, we discussed Present Value’s inventory control services. In addition to this, Present Value can provide investors and lenders with asset verification reports that confirm a business’s physical assets.
By: Present Value
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