How Appraisals Support Asset Based Lending and Lease Negotiations

Using well substantiated valuations is key when leveraging assets for funding or negotiating leases. Here is a deeper look at how appraisals support both scenarios:

1. When Lenders Need Assurance: The Role of Appraisals in Asset Based Lending

Asset based lenders typically lend a percentage of an asset’s value, so having a credible, third party appraisal allows you to unlock financing while protecting both sides.

• Collateral value matters: Lenders often require an appraisal of machinery, equipment, or real estate to define the borrowing base and determine loan amounts. Without it, financing may be limited or denied.
• Flexible valuation methods: Depending on context (whether retooling, refinancing, or borrowing against aging equipment), the appraisal can reflect fair market value, orderly liquidation, or forced liquidation value. This aligns with lender risk tolerance and business needs.
• Efficient loan setup: With certified appraisals in hand, lenders can expedite underwriting, especially when assets and values are well documented. This can be particularly useful in structured facilities like term loans secured by equipment.

2. Negotiating Lease Terms with Confidence: How Appraisals Help

Whether you are a lessee or lessor, knowing current and residual values ensures equitable lease agreements.

• Fair rent and renewal terms: Accurate valuations set a transparent baseline for lease payments or purchase options, avoiding friction at lease expiry when residual values are recalculated.
• Residual value planning: Lessors and lessees both benefit when the equipment’s value at lease end is realistic and based on sound methodology. This allows for better negotiation or replacement strategies.
• Financing-backed lease structures: Some leases include end-of-term buyouts or renewal clauses that hinge on appraisal-based residuals, especially for high-value or custom equipment.

3. Appraisal Methodology That Makes the Difference

At Absolute Appraisals & Consulting Inc., every appraisal follows a structured process tailored to financing or leasing contexts:

1. Clarify the purpose of the appraisal: Whether for financing collateral, lease negotiation, insurance, or disposition, the intended use guides the valuation method.
2. Inspect and document: Onsite inspection verifies condition, usage, make model, hours, modifications—critical data for accurate valuation.
3. Analyse market and comparable assets: Research includes auction records, dealer data, and even custom equipment trends.
4. Apply appropriate value definition: We may provide a suite of values (fair market, FMV installed, liquidation values), so clients and lenders have complete clarity.
5. Deliver a certified report: Each report is prepared under AIC standards, authored by Arlene Blake, CRA, P.App (AIC), and Accredited Member (AM) ASA Machinery & Equipment.

4. Why Choose Absolute Appraisals & Consulting Inc.

Credibility matters when you are leveraging assets for capital or negotiating leases:

• Qualified expertise: Arlene Blake holds both AIC and ASA credentials, ensuring compliance with Canadian and international appraisal standards.
• Depth in machinery, equipment, and real estate: From agri machinery to industrial facilities, every valuation is built on a foundation of sector knowledge.
• Local and reliable: Serving Ontario’s Niagara, Hamilton, Grey/Bruce, and Owen Sound regions, the firm understands regional market dynamics.
• Customized to the objective: Whether you need collateral for a bank, a trusted fair rental rate, or clarity in lease end residuals, every appraisal is purpose built.

5. FAQs: How Does This Work in Real Terms?

Question	Answer
Can lenders accept internal estimates?	No. Most lenders require third party appraisals to validate collateral. Estimates may delay or jeopardize financing.
Is there one value for all purposes?	No. Fair market value, liquidation value, installed value—all serve different purposes in lending or leasing. A versatile report covers all.
How often should you reappraise?	Repeat appraisals are vital if equipment usage changes, market conditions shift, or leases are renegotiated.