By Mike Lachant, C.E.A. MDNA Member Firm, MI-RO Machinery Corp.
Published on March 6th 2019
An appraisal, by definition, is an opinion of value. Who provides that opinion, and the reasons why that opinion is sought out, go hand in hand. Here are 5 reasons why an appraisal makes sense for business owners of all sizes.
Plus, read more about the experts you should hire to do your Appraisals below.
- A company is growing: As a manufacturing company takes advantage of its competence and its success, it needs to take strides to maintain their edge and expand their capabilities. Owners can go to their banks or the myriad of financial institutions to arrange for financing their expansion, whether it is their building that needs expanding or their capabilities. Owners can use their existing equipment as a borrowing base to secure the financing necessary, and by having a professional appraisal of their equipment done, the financial entity will know what the equipment is worth reliably and will loan against it with confidence, knowing that an industry expert (AMEA Appraiser) has done the work.
- A company is in trouble: There are times when a company hits a rough patch and needs a financial lifeline. Many times that comes in the form of a loan or line of credit. Similar to the above scenario, the financial institution that the owner goes to will need to know what the company’s assets are worth in the event the company defaults on their obligation, and a liquidation will need to be conducted. Chances are the lender will request an orderly liquidation value appraisal, which is a somewhat pessimistic value concept popular with banks and leasing companies who require a realistic, almost worst-case scenario valuation.
- Estate planning: Every family-owned or small to mid-size manufacturing company needs to have a succession plan in the event of the death or incapacitation of the owner(s). Most legal professionals would recommend an appraisal of the company’s assets in the event of a worst-case scenario, especially an unexpected one. Knowing what a manufacturing company’s assets are worth eases the burden for the surviving members at a time when their emotions and mental focus are elsewhere. A seasoned machinery expert can provide an appraisal that can be used to establish asset value for surviving family members when it comes time to settle the estate.
- Partnership changes: There are times in any relationship, including business partnerships, when a change is needed. Whether it is one owner buying out another due to differences in personalities, vision for the future, or change in life plans, having a current equipment appraisal helps establish a value for the whole business, and allows one partner to buy out the other with as few bumps in the road as possible since all parties were involved in having the appraisal done, and are confident in the appraiser’s knowledge of the equipment and the marketplace.
- Insurance Coverage: When insuring the building, it is a necessity to have the contents valued as well. Accidents and natural disasters can happen in all areas of the country (and the world), so having the manufacturing assets valued professionally allows underwriters to confidently insure the contents of a factory knowing that someone with familiarity with the market and asset pool performed the appraisal. It gives the policy holder a level of comfort knowing that they are covered fully in the event of disaster. It is recommended that a fair market value concept be used, as it depicts a real-time snapshot of what it would cost to go out and buy replacement equipment on the open market at a moment’s notice.
Consider these experts when looking for an appraisal…
ABOUT AMEA APPRAISERS
Members of the AMEA (Association Of Machinery And Equipment Appraisers) are individual machinery and equipment appraisal professionals who have demonstrated their proficiency through testing, peer review and continuing education. Their experience and expertise range from three to fifty plus years, and they specialize in and are not limited to metalworking, plastics, construction, chemical, woodworking, textile, food processing, printing, rubber, steel mill and foundry machinery and equipment. Read More….