Does the SBA require an equipment appraisal?

When does the SOP require one?

The SBA SOP does not require an equipment appraisal on every loan. It requires one when the credit rests on the value of the equipment rather than on the going concern alone. The most common trigger is significant equipment value supporting the loan above a stated dollar level. The SOP also calls for an independent appraisal when the buyer and seller are related, because a price set between related parties is not an arm's length price, and in defined refinance and change-of-ownership cases where the agency wants an objective value on the collateral.

The exact dollar threshold lives in the current SOP and changes between versions, so we do not quote a fixed figure here. Your lender applies the version in force to your specific credit. The practical rule for a borrower is simple: if equipment carries the loan, expect the file to need an independent appraisal, and plan for it early so it does not stall underwriting.

Who can perform an SBA equipment appraisal?

An independent, qualified appraiser with no stake in the transaction. The SOP wants a true third party, unrelated to the buyer, the seller, the lender and the broker, so the value carries no conflict of interest. The appraiser also has to be qualified for the asset class, which for machinery and equipment means real experience valuing the kind of assets in front of them, not a generalist guess.

• Independent: no interest in the loan, the sale or the parties to it.
• USPAP-compliant: prepared under the Uniform Standards of Professional Appraisal Practice.
• Qualified for the asset: a NEBB-certified Machinery & Equipment Appraiser (CMEA) who values that equipment as a discipline.
• Properly scoped: the assignment is matched to the SOP standard the lender is working to.

Which value premise does the file need?

It depends on the credit. Most SBA equipment financing rests on Fair Market Value (FMV), the price equipment would bring between a willing buyer and a willing seller, neither under pressure and both informed. FMV is the going-concern number for a borrower that intends to keep using its assets, which covers most 7(a) and 504 lending.

When the credit carries more risk, or when the lender wants the downside on the record, the file also calls for Orderly Liquidation Value (OLV), the price the assets would bring in an advertised sale over a reasonable period, and sometimes Net Orderly Liquidation Value (NOLV), that figure after the costs of selling are removed. The SOP and the lender decide which premise the file needs. We confirm the assignment before inspection and never quote a value before we have seen the equipment.

What do lenders and the agency look for?

They look for a report that holds up without a callback. That means a clear statement of scope and premise, the methodology shown, each asset identified and valued in an itemized appendix, and inspection photographs that tie the value to real equipment. The report has to be independent and certified, and it has to match the SOP requirement the lender is citing. Where a 504 loan is involved, a Certified Development Company sits beside the lender, and the same independence and documentation standards apply.

This is where lender fluency matters. Jesse Lukes came up inside the bank at BMO, originating loans and reviewing collateral, so the file reads the way a lender reads it. The premise, the comparables and the appendix are laid out so an underwriter and an SBA reviewer can follow the value without sending the file back. The report is prepared to withstand lender, SBA, IRS, audit and legal review, and it goes through senior review before it leaves our office.

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