Asset Valuation

What is asset-based lending?
Asset-based lending is a financing solution for companies that are unable to obtain or are restricted by traditional bank financing options.  The additional capital raised can serve as an immediate infusion of working capital, to fund a new acquisition or to purchase new equipment, among other purposes.

Why do my assets need to be appraised to get a loan?
These types of loans are always secured by a group of assets, which may include machinery, inventory, real estate, accounts receivable and intangible property or a combination of the above.  When evaluating a loan of this type, financial institutions perform in-depth due diligence to understand the strength of the company, its ability to repay the loan and the valuation of assets securitizing it.  This is where AccuVal comes in.  The two most commonly requested asset valuation definitions used by asset-based lenders, as defined by the American Society of Appraisers, are:

Forced Liquidation Value — 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. 

Orderly Liquidation Value — 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.

In addition, asset-based lenders will frequently request that  asset valuations include an estimate of the cost to conduct an auction or liquidation sale, thus indicating the net realizable value after sale expense and sometimes after considering other holding costs, too.

How are asset valuations conducted?
AccuVal helps lenders and borrowers to understand the valuation of assets collateralizing the loan by examining various scenarios for liquidating the assets in the event of loan default.  Depending upon the industry and nature of the assets, AccuVal recommends the most appropriate and likely liquidation scenario to serve as the basis for underwriting the loan.  There are three generally accepted approaches used in asset valuations, but not all of these approaches are applicable when valuing certain assets for asset-based lending purposes:

Market (sales) comparison approach to asset valuation – Actual market transactions of similar assets are compared to the subject asset and adjusted for variations that would likely affect price.

Cost approach to asset valuation – The present cost of replacing the asset(s) is derived, less all accrued depreciation.

Income approach to asset valuation – Future income streams from the asset are capitalized and discounted to a Net Present Value (NPV).

AccuVal is a pioneer in the leveraged finance industry and tens of thousands of asset-based loans have been backed by our asset valuations.  Our team is experienced at uncovering hidden value in untraditional places and recommends asset bundling strategies that maximize the borrowing power of companies.  AccuVal’s appraisals reflect current market conditions and model real-world liquidation scenarios.  In the event of loan default, our sister company, LiquiTec can be engaged to execute a sale of the secured assets.