Using Your Equipment and Machinery Assets as Collateral

Collateral is the property or other assets that a borrower offers to a lender to secure a loan, and will be forfeited and typically sold in the event of a default.  Very often businesses use assets such as equipment, machinery, buildings or inventory as collateral to reassure lenders that they have another source of repayment if the need should arise.  

When financing new business assets, they are in most cases automatically considered collateral until such a time that the loan is paid in full.  If the amount of equity you put toward the purchase of the new assets is considered insufficient, other assets may be required as collateral toward the debt. 

According to the U.S. Small Business Association, “Certified appraisals are required for loans greater than $250,000 secured by commercial real estate. The SBA may require professional appraisals of business and personal assets, plus any necessary survey and/or feasibility study.”  They further state that when real estate is being used as collateral, banks and other regulated lenders are required by law to obtain third-party valuation on transactions of $50,000 or more.

For any SBA loan, all owners are required to make a personal guaranty that consists of 20% or more of the business along with any other individuals who hold key management positions. They state that, “Whether a guaranty will be secured by personal assets or not is based on the value of the assets already pledged and the value of the assets personally owned compared to the amount borrowed.”

This is where the services of a company such as Rabin are invaluable by offering accurate third-party valuations to a business.  Our asset appraisal services provide an essential starting point for any asset-based lending or disposition process.  For over 60 years, we have expertly assisted companies with obtaining working capital by valuing assets promised as collateral to asset-based lenders and investors. 

Rabin is an international company that specializes in creating liquidity for complex manufacturing facilities with idle or marginally productive assets.  Rabin’s operations include selling entire plants, multiple plant locations, or surplus individual items by auction or liquidation and much more. Past auctions include names such as Hostess, Braniff Airlines, Montgomery Ward, and the Railway Express Agency. 

Source:

Small Business Association https://www.sba.gov/content/collateral