Accurate Valuation Is Critical to Selling Your Business! 

Equipment and Machinery Inspections

Valuing your business accurately is essential if you don’t want to risk leaving money on the table or scaring away potential buyers. Before undertaking the appraisal, put time into sprucing up your business and its financials. Effort spent at the outset will pay dividends down the road.
The value of a typical small business should be greater than the total values of its tangible assets. For a buyer, the appeal is that an ongoing business has everything necessary for successful operation — equipment, location, and inventory if applicable, not to mention experienced employees, suppliers, business processes, and a customer list — all in place, in the right amounts.
These intangible assets are frequently referred to as goodwill or going-concern value. But how do you put a price on goodwill or going-concern value? In fact, how do you determine the true market value of the hard assets used in your business? The answer is that you make a certified commercial appraiser a key player on your selling team.
Many business owners don’t want to spend the time or money to have an appraisal done. However, trying to save money on the appraisal is likely to be to your disadvantage. Guessing at the value of your business is likely to result in either a price that’s unrealistically high and turns off many potential buyers, or a price that’s unnecessarily low and keeps you from cashing out at full value.
An appraiser certified by the American Society of Appraisers has specialized training and experience in business appraisal techniques. As a profession, they have established a number of ways to quantify the value of key aspects of your business, and roll them up into an overall figure. As part of the process they will write up a valuation report, which explains in detail how they arrived at their final value. Having a valuation document prepared by an outside expert adds a great deal of credibility to your asking price, because the buyer will be able to see exactly how you arrived at your final figure.
Keep in mind that if you sell out to a larger company, they will be much more comfortable going through with the sale (and much more impressed with your management ability) if you have a detailed appraisal prepared.
On the other hand, remember that value is in the mind of the beholder. A professional valuation can tell you the price that an average buyer might pay for your business. However, when it comes to negotiating with an actual buyer, the appraisal is just a starting point. A particular buyer may have a strong strategic reason for acquiring your company, and may be willing to pay a premium over what the average buyer might offer. Another buyer might simply be looking for certain assets to augment his or her own business, and may not be willing to pay for your company’s going-concern value at all. It’s important that you and your business broker size up the particular buyer’s reasons for acquiring your business before naming a price.

Takeaways from the 2018 Credit Manager Survey
Posted 06/26/2018
What is the state of credit and collections in the equipment finance industry? The 8th Annual Credit Manager Survey provides some key insights. The survey results, based on feedback from 128 ELFA credit and collections leaders, were presented at the association’s 2018 Credit and Collections Management Conference, June 4-6 in New Orleans. The 2018 survey covered a variety of topics, including credit metrics at bank, captive and independent leasing companies; collateral and residual valuations; credit processes; regulation; and the macroeconomic environment.
Top Takeaways & Highlights from the 8th Annual Credit Manager Survey include:
* Portfolio quality remains good and confidence is high.
* We are in good times but—those with 10+ years of experience are nervous at this stage of the economic cycle.
* 40% of the respondents to the survey expect growth volume to exceed 10% in 2018.
* Respondents said the overall view is to maintain current standards regardless of lender type.
* Using more technology to gain efficiencies is the goal.
* The regulatory environment remains time consuming and intense, extending beyond just banks.

Increases in requests from clients to modify credit or documentation requirements include:
Financing of a higher percentage of intangibles
Longer financing terms
Waiver of guarantees
Waiver in change of control
Waiver of cross defaults
Softer notice and return provisions
Stable Probability of Default (PD) but watch out for Loss Given Default (LGD).
Unfavorable industries exist:
Metals and mining
Some agriculture
Fraud remains a concern
Have credit managers become way too complacent with the stellar credit results? We will pay a price for this! Have we already forgotten the lessons learned in the not-so-distant past?
As credit managers comb through their portfolios, policies, processes and new approvals, a frequent question asked is:
                                   “What are we missing?” Is the Perfect Storm Brewing?
Rising interest rates
Higher leverage
Loosening of credit structures, terms and conditions
Uncertain collateral recovery rates
Unfavorable tax impact
Pricing competition

What Keeps You Up at Night?
It is truly the question on the survey “What Keeps You Up at Night?” that is the most telling. In linking this survey question to the countless discussions at the Credit and Collections Management Conference, it is the last takeaway above—“Is the Perfect Storm Brewing?”—that is most unsettling to credit professionals within the equipment finance industry. Are we really ready for the unexpected events and the inevitable downturn in the credit cycle and are we managing our portfolios accordingly? Only time will tell.

About the Survey-
The Credit Manager Survey began as an offshoot to a portfolio management session at the Credit and Collections Management Conference more than nine years ago. The initial survey had few respondents and was limited in scope, asking just a handful of questions. After the session, Tom Ware of Paynet, Andrew Mesches, then at Key Equipment Finance and now at the ALTA Group, Doug Berman of Cisco Capital and Kevin Prykull of PNC Equipment Finance had an idea to enhance and more fully develop a robust Credit Manager Conference Survey that could ask pertinent questions related to credit and be conducted annually in a more formal fashion. With the help of Bill Choi of ELFA, the survey became more focused in targeting ELFA’s membership, which significantly increased the number of respondents.

Planning for the Credit Manager Survey commences in November and a full kickoff meeting is held the week after New Year’s Day. The Survey Committee retains certain questions in order to assess changes and trends and likewise introduces new questions. Several open-ended questions are retained, including the perennial favorite: “What Keeps You Up at Night?” The survey is reformatted and sent to constituents for completion in March. The Survey Committee reconvenes in late March to review and analyze the results. Then preparations are made to finalize the survey for presentation at the ELFA Credit and Collections Management Conference in early June.

The 2018 survey committee consisted of six equipment leasing and finance professionals, including: Scott McCann of Wells Fargo Equipment Finance, Patrick Moore of Paynet, Michael (Mic) Mount of US Bank Equipment Finance, Amy Wingate of Cisco Systems Capital Corporation, Rachel Kling of Wells Fargo Equipment Finance and Kevin P. Prykull of PNC Equipment Finance.
Looking Ahead to 2019

As Richard Dawson used to remark on Family Feud, “And the survey says!” Stay tuned for next year’s survey. If you would like to become active in the 2019 survey, please contact Heather Staverman at ELFA ( or Kevin P. Prykull at PNC Equipment Finance ( for details.

Kevin P. Prykull is Senior Vice President & Credit Underwriting Executive at PNC Equipment Finance and a member of the ELFA Credit & Collections Planning Committee. Kevin is a CLFP. For more on this topic, a recording of the “General Session – Credit Manager Survey” from the 2018 ELFA Credit and Collections Management Conference is available in ELFA’s Conference Resource Center at
Amy Vogt, ELFA

2018 Equipment Leasing & Finance U.S. Economic Outlook

This comprehensive report analyzes global and domestic trends impacting capital spending and economic growth in the coming year. It identifies key signposts specific to the equipment finance industry and features Momentum Monitors that identify turning points for 12 verticals in their respective investment cycles. Each economic outlook is updated quarterly.
Summary Equipment & Software Investment Outlook:
Equipment and software investment growth is expected to strengthen in 2018 after expanding at a solid pace in 2017. A strong labor market, elevated business confidence levels, and healthy credit conditions should build on the economic momentum experienced in 2017, while tax cuts and a firming oil sector will likely offer additional boosts to growth. However, a rising interest rate environment could weaken lending activity as the year progresses. Overall, investment in most equipment verticals should remain solid in 2018. Over the next three to six months:

  • Agricultural Machinery investment growth may slow somewhat;
  • Construction Machinery investment growth should remain strong;
  • Materials Handling Equipment investment growth should remain solid;
  • All Other Industrial Equipment investment growth may decelerate;
  • Medical Equipment investment growth may have peaked and is likely to decline;
  • Mining & Oilfield Machinery investment growth may weaken but remain positive;
  • Aircraft investment growth may soften;
  • Ships & Boats investment growth is expected to decline;
  • Railroad Equipment investment growth may decline modestly;
  • Trucks investment growth should remain solidly positive;
  • Computers investment growth should remain solid; and
  • Software investment growth should remain steady.
  • U.S. Capital Investment & Credit Markets

Despite a slight increase in financial stress, U.S. credit conditions remain relatively strong. Supply and demand saw little change from last quarter, though private sector loan growth weakened. The Federal Reserve is expected to raise its benchmark interest rate three to four times in 2018, which may cause loan growth to decline further as higher interest rates push businesses toward cash financing. Overall, however, capital spending should remain on solid footing.

Overview of the U.S. Economy
The U.S. economy appears to be in good shape in 2018, as tailwinds from 2017 are carried over and several headwinds faced in previous years have faded. The labor market will continue to firm and should lead to increased consumer spending, while business investment will likely be a major bright spot in the coming year as tax cuts and a lighter regulatory touch encourage capex spending. Overall, the economy should grow at a relatively strong pace over the course of the year, despite what appears to be a softer-than-anticipated first quarter.

Bottom Line for the Equipment Finance Sector:

After solid growth in 2017, equipment and software investment will likely continue to strengthen in 2018. Business investment is expected to expand robustly, and stable credit conditions should foster an environment conducive to growth. Overall, we expect the economy to grow 2.7% in 2018 (unchanged from our annual outlook), while equipment and software investment is projected to expand 8.5% (down from 9.1% in our annual outlook).

Today, mid-market lenders are facing more competition than ever for small business loans. More than 30% of firms with revenues under $100,000 are now turning to online sources. And large banks remain the biggest competitor, taking 58% of small business loan applications.

Still, small businesses prefer small banks.

By: Equipment Leasing Foundation

STATE OF THE INDUSTRY 2017-Key Factors Driving Equipment Finance

By Jeff Jensen and Elizabeth Rust

Reflecting on the past year, 2016 was an economic disappointment. Growth slowed to a crawl in the first two quarters, while equipment and software investment contracted. The economy began to show signs of life in the third quarter and grew at a 3+% annualized rate for the first time in two years, but business investment continued to disappoint.

At the start of 2017, most indicators point to an economy that is solidifying. In the 2017 Annual Equipment Leasing & Finance U.S. Economic Outlook (jointly produced by the Equipment Leasing & Finance Foundation and Keybridge), we projected an above-consensus growth rebound of 2.7%, along with a decent 3.0% expansion in equipment and software investment. Despite this optimism, however, there are several potentially significant economic headwinds on the horizon-as well as larger-than-usual “tail risks” that, if realized, would have a major negative effect on both the economy and the equipment finance industry.

On behalf of the Foundation, Keybridge economists produce monthly U.S. Equipment Software Investment Momentum Monitors and quarterly industry-focused economic outlooks. Drawing on these materials, here are nine key industry, policy and macroeconomic factors to watch in 2017.

1. The U.S. economy is strengthening, driven by wage growth and consumer spending.

In recent months, it has become increasingly clear that the U.S. economy has moved past the growth pause that occurred in late 2015 and the first half of 2016, and a return to more decent growth is likely. One of the key drivers of this trend is tightening labor markets-and, by extension, wage growth. Wages stagnated for years following the Great Recession, but with unemployment now well below 5% and jobless claims at near-record lows, businesses will increasingly need to entice new workers with better wages to attract talent. The effect of upward wage pressure would be amplified if federal lawmakers can agree on an infrastructure spending package (which would create jobs) and tax relief for consumers and businesses (which would raise real disposable income), as many political insiders anticipate. The cumulative effect of these market and policy developments should translate into healthy consumer spending in 2017, which typically comprises roughly two-thirds of the economy. One of the downsides of rising wages, however, is increased inflationary pressures, and with core inflation currently running at 2.1%, this will be something to watch in the months ahead.

2. Business investment should improve.

Although fourth quarter data will not be released until late January, 2016 will likely go down as a year of negative growth for equipment and software investment. While we expected business investment to slow in the 2016 economic outlook released with the Foundation in December 2015, the industry performed even worse than we anticipated due to the combination of continued manufacturing weakness, a persistently strong dollar, low oil prices and fading business confidence.

Moving forward, it appears likely that capital spending will pick up in 2017, at least somewhat. Business confidence, especially among small businesses, appears to be rebounding: both the National Federation of Independent Business Optimism Index and the Foundation’s Monthly Confidence Index increased sharply at the end of 2016. In addition, oil prices have stabilized, consumer demand remains relatively strong, credit market conditions are healthy and inventories, which declined for five consecutive quarters, should rise to meet market demand (as they began to do in late 2016). Look for a modest expansion of equipment and software investment of around 3.0% in 2017.

3. Most equipment verticals are exhibiting positive momentum.

As any regular reader of the Foundation-Keybridge U.S. Equipment and Software Momentum Monitor should know, most equipment verticals were “flashing red” for much of 2015 and early 2016, and were a harbinger of the investment slowdown that occurred last year. In recent months, however, most verticals have shown positive signs of momentum. Much of the improvement is related to a more supportive price environment for energy production activities, and substantially higher momentum readings for several equipment investment verticals (e.g., oilfield and mining equipment, railroad equipment, other industrial equipment and materials handling equipment) can be traced back in part, either directly or indirectly, to higher oil prices.

Another equipment vertical to watch in 2017 is construction. Although annualized investment has contracted for six consecutive quarters, construction sector momentum rebounded during the second half of 2016. A key driver of investment in this vertical is the demand for housing, which remains solid. For example, the National Association of Home Builders housing market index is at its highest point since 2005 due to a combination of solid employment numbers, steadily rising incomes and increased business and consumer confidence. Moreover, the prospects of a large infrastructure federal spending bill during the first half of 2017 could provide an additional boost to construction equipment investment.

One of the exceptions to the overall positive story as we enter 2017 is agriculture equipment. Although momentum improved somewhat late last year, it remains subdued and continues to signal weak or negative investment growth.

4. The oil sector will cease to be a major drag on the U.S. economy.

The 18-month oil price freefall that began in mid-2014 was devastating to the U.S. oil sector and led to continued severe contraction in energy-related investment in 2016. This sharp decline spilled over into other equipment verticals (e.g., railroad, materials handling and industrial equipment), dampening the environment for capital expenditures and dragging down economic growth.

Looking ahead, oil prices appear to have stabilized at $45-$55 per barrel, which should encourage energy firms to ramp up production and investment. Indeed, oil rig counts have grown consistently since last summer, and oilfield and mining equipment investment expanded in the third quarter for the first time in over two years. These developments suggest that the energy sector will no longer be a large minus for U.S. growth in 2017, and could even turn into a modest plus if prices hover on the high end of the forecasted range.

5. Portfolio performance will likely continue to soften in 2017.

The equipment finance industry has enjoyed superb portfolio performance for several years following the 2008-09 recession. However, while performance remains strong by historical standards, 2016 may turn out to be an inflection point. Delinquencies and charge-offs are above year-ago levels, and a continued rise in both metrics should be expected as the economy expands, industry competition remains intense, and firms look for ways to attract new business. As was the case last year, we do not expect a sharp decline in portfolio performance, but industry executives should prepare for a slow but steady rise in delinquencies and charge-offs this year.

6. Federal policy is likely to become more business-friendly-for the most part.

With the 2016 election finally over and Republicans set to control both Congress and the White House, many political observers expect reduced gridlock and forward movement on long-stalled policy priorities. The stars are aligned for Congress to have their best chance at comprehensive tax reform in decades; the result could be legislation that reduces taxes on households and businesses, including a one-time repatriation incentive that could result in $1-2 trillion in offshore profits being reinvested in the U.S. economy.  President Trump has also signaled interest in a temporary spending boost that would lift employment while providing needed improvements to key infrastructure across the country. Both proposals would promote business investment and economic growth, but could increase the deficit unless they are paired with other measures that decrease federal spending or increase federal revenues.

Additionally, Republicans may push ahead on other policies that could also promote business investment and economic growth depending on how they are designed. One example is a potential repeal of significant portions of the Dodd-Frank Wall Street Reform and Consumer Protection Act and reform of others, which would be supported by many financial institutions. In addition, the Trump Administration has vowed to reduce the cumulative regulatory burden on businesses (highlighted by a “one in, two out” approach), which could increase business investment and hiring.

However, other parts of the President’s economic plan are viewed skeptically by mainstream economists and could offset some of the benefits discussed above. For instance, eschewing free trade principles by imposing tariffs and other penalties on U.S. companies would increase costs for both U.S. businesses and consumers, while labeling China as a currency manipulator could set off a chain of retaliatory actions that lead to a trade war (and possibly a recession). Further, the President’s hardline stance on immigration reform runs counter to the view among many economists that foreign workers provide net benefits to U.S. households and the overall economy. If millions of undocumented immigrants are deported, respected economic models project it could shave several tenths off economic growth each year.

7. The Federal Reserve Board will resume efforts to normalize interest rates.

In late 2015, the Federal Reserve Board finally increased its benchmark interest rate for the first time since the Great Recession, and most observers assumed that more rate increases would follow in 2016. Instead, the Fed opted to postpone additional rate hikes, largely out of concern for the economy’s sluggish growth. However, the Fed finally raised interest rates again in December 2016, following stronger economic data during the second half of the year. We anticipate multiple additional rate increases this year. With unemployment at 4.6%, steadily rising wages and the potential for growth-friendly federal policies in the months ahead, the Fed will feel pressured to act to keep inflation in check. We expect three more rate increases by the end of the year, and recent comments from Fed officials suggest they are open to a fourth rate increase to protect the economy from overheating and inflation running rampant.

8. Worries about a Chinese hard landing have faded somewhat, but emerging markets on the whole are likely to remain weak.

This time last year, many economists worried that China’s economy, marred by overleveraging and overinvestment, was headed for trouble in 2016. This concern has eased somewhat due to increased confidence in the Chinese government’s ability to manage its financial sector, but fears persist that China’s economy is headed toward a long-term slowdown. The Chinese economy is expected to grow 6.3% in 2017, significantly lower than the 7+% growth it averaged after the Great Recession and the 10% average annual growth it experienced from 2000-2009. This slowdown is typical of country in the midst of transitioning to a middle-income economy, and may also indicate that an unhealthy investment binge driven by construction is easing. However, U.S. and global economic performance is closely tied to China’s fortunes, and some analysts worry that China’s slowdown may be worse than the official numbers indicate.

With respect to emerging markets, growth prospects should improve in 2017, but remain weak by historical standards. In Brazil, economists predict just 1.1% growth, which would be a soft rebound from a deep recession in which the economy shrank by -3.2% last year. Likewise, the Russian economy is set to expand 1.3% after a contracting by -0.8% in 2016. India remains a bright spot, with growth projected to reach 7.5% this year. On net, however, growth expectations for emerging markets are tepid and could prove to be a headwind to growth in the United States and other advanced economies.

9. Trade is in the cross hairs, and is set to continue a slowdown in 2017.

Although final data are not yet available, global trade volume in 2016 likely grew at the slowest pace since the Great Recession, continuing a five-year slowdown not seen since the 1980s. Trade has been harmed by a combination of global economic weakness, political uncertainty and a populist backlash. Slowing growth in emerging markets like China and Brazil led to a decline in exports, while soft demand in the United States and other large importers exacerbated the issue. At the same time, trade restrictions (including tariffs, quotas, import duties and other barriers) and the collapse of high-profile trade deals like the Trans-Pacific Partnership (TPP) and Transatlantic Trade and Investment Partnership (TTIP) further impede growth. Trade policy was at the forefront of U.S politics during both parties’ primary races as well as the general election, and according to the Pew Research Center, more Americans now believe that U.S. engagement in the world economy is a negative (49%) rather than a positive (44%).

Although underlying conditions for economic growth are expected to improve, trade will likely continue to underperform in 2017. Despite the view among many economists that pro-trade policies benefit the U.S. economy and improve living standards for Americans in aggregate, the new administration has sent signals that it will take a tougher stance against free trade in an effort to protect vulnerable U.S. workers (particularly those in the manufacturing sector). These efforts are likely to include cancelling the TPP and renegotiating the North American Free Trade Agreement (NAFTA), and may lead to the United States labeling China a currency manipulator-which would likely trigger a retaliation from China against U.S. firms that export to China or rely on Chinese factories, including Boeing and Apple.

Accounting for these nine factors…

In sum, expect a better year for equipment investment than we experienced in 2016. U.S. economic fundamentals are reasonably strong already, and the combination of solid wage and consumer spending growth, improved oil markets and a policy landscape more amenable to business interests should drive economic growth even as interest rates continue to rise. While significant headwinds remain and tail-risk events are more likely this year than usual, equipment finance executives have reason to be cautiously optimistic about the year ahead.

Jeff Jensen is a Senior Director and Elizabeth Rust is a Senior Analyst at Keybridge Research.

What You Should Know Before Choosing a Machinery & Equipment Appraiser…


Choosing an machinery & equipment appraiser isn’t as easy as locating a name in the telephone book. States don’t regulate machinery & equipment appraisers as they do real estate appraisers, and don’t require a machinery & technical appraiser to have a license. Choose an appraiser who has completed the coursework from American Society of Appraisers, (ASA) an accreditation appraisal society. Completion of the Uniform Standards of Professional Appraisal Practice, known as USPAP, is standard for a certified appraiser. USPAP provides quality control standards acceptable throughout the industry. Continuing education is also important for machinery & equipment appraisers. Procedures and regulations are always changing. Because of this; ASA constantly updates, expands and re-writes its courses to ensure that its members will perform the work you need with knowledge of all the latest professional standards.


Contacting several machinery and equipment appraisers by telephone gives you an opportunity to develop a rapport and get a feel for each appraiser’s schedule and time constraints. Explain with some detail the business assets and personal property you need appraised, the purpose for the appraisal, and the date you need a completed written report. Ask about the fee, travel charges, and expenses, and be certain the appraiser agrees to meet your deadline for the written report. An ethical appraiser won’t attempt to buy your items and won’t charge a percentage fee. Make your choice based on the answers you get from your telephone discussion.

Preparation and Estimating a Machinery & Equipment Appraisal Fee

You can expedite the machinery and equipment appraisal process by providing a general inventory of the items to be appraised. An initial list of items is helpful to the appraiser especially in estimating the size and scope of the assignment as well as the appraisal fee. While conducting a certified appraisal, the machinery and equipment appraiser will compile a detailed list to include but not limited to, a complete asset description, condition, the estimated age, and a photo of each item. This asset list will be an integral part of the written appraisal report.

 You wouldn’t hire a lawyer who didn’t pass the bar exam, so why would you hire an appraiser who didn’t pass the USPAP exam? A certified machinery and equipment appraiser will have passed the rigorous Core Course Curriculum on Appraisal Methodology from the American Society of Appraisers as well as the Ethics and USPAP (Uniform Standards of Professional Appraisal Practice) exams.  They also keep up with the latest information in the business and appraisal world by attending continuing education courses.