FMV vs OLV for lenders: which value does the bank want?
For lending, the bank usually wants a liquidation premise, not a retail one. Fair Market Value (FMV) is the price between a willing buyer and seller, neither under pressure. Orderly Liquidation Value (OLV) is what the same assets bring in an orderly, time-limited sale, and it is typically lower.
Lenders lean on OLV, or Net Orderly Liquidation Value (NOLV) after the costs of sale: what they could recover if they had to sell the collateral. The SBA's 7(a) collateral rule is written against OLV. FMV still appears for purchases and accounting. The purpose of the file decides which one you need, and Lukes & Lukes, an independent machinery and equipment appraisal firm, can report either, or both side by side.
By Jared Lukes · CEO & lead appraiserUpdated
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What is fair market value, and when is it the right premise?
Fair Market Value is the price at which equipment would change hands between a willing buyer and a willing seller, neither compelled to act, both reasonably informed, with adequate time to market. The IRS states the same test in Publication 561. FMV answers "what is this worth in a normal sale." It is the right premise for a purchase, a sale, financial reporting and many tax and estate matters, and it is usually the highest of the common premises.
| Premise | Sale it assumes | Where it sits | Files that usually call for it |
|---|---|---|---|
| Fair Market Value (FMV) | Willing buyer and willing seller, neither compelled, with adequate time to market | Usually the highest of the common premises | Purchase, sale, financial reporting, many tax and estate matters |
| Orderly Liquidation Value (OLV) | Compelled seller, limited but reasonable period, typically through dealers or auction | Generally below FMV | Lending and SBA collateral files |
| Net Orderly Liquidation Value (NOLV) | The OLV sale, with commissions, removal and fees subtracted | The net the lender could expect to recover | Lending and SBA collateral files |
What is orderly liquidation value, and how does it differ from FMV?
Orderly Liquidation Value is what the assets would bring in a sale conducted over a limited but reasonable period, with the seller compelled to sell, typically through dealers or auction. It assumes time pressure and a wholesale channel, and it generally sits below FMV. Net Orderly Liquidation Value is OLV minus the costs of selling. For what those costs are and how the net is calculated, see what NOLV means and how appraisers calculate it.
For equipment collateral, does the bank use net book value or OLV?
On SBA 7(a) loans, the bank can use either. On older equipment written well down on the books, an orderly liquidation appraisal can support more credit than book value. Under SBA SOP 50 10 8.1 (effective October 1, 2026), used machinery and equipment counts toward "fully secured" at no more than 50% of net book value, or 80% with an orderly liquidation appraisal, minus any prior liens. Net book value is the asset's original price minus depreciation. A value above net book value requires an independent appraisal by a qualified individual who is independent of loan production.
Conventional lenders set their own collateral policy, and the policy names the premise. More on equipment appraisals for SBA 7(a) loans.
Why do lenders use OLV instead of fair market value?
Lenders use OLV because they underwrite the downside, not the best-case sale. If the borrower defaults, the bank may have to sell the collateral on a timeline it does not control. OLV and NOLV model that sale, and they are the recovery values a credit desk wants behind a loan. The SBA credits OLV. Bank examiners hold the same line: the OCC's asset-based lending handbook says collateral appraisals "should provide a NOLV as the standard for collateral valuation, not cost or retail value."
Which value should you order for a loan file?
Order the premise the file calls for, and confirm it with the lender or program before the appraisal begins. Lending and SBA collateral files usually call for OLV or NOLV. A purchase, sale or financial-reporting need usually calls for FMV. Some files want more than one premise reported side by side.
The same equipment can carry all of these values at once, each correct for its own question. For the full set of premises and how they relate, see our explainer on FMV, OLV, FLV and NOLV, and for how a defensible number is actually built, see how we arrive at a value.
Common questions
Answers, up front.
Does the bank want FMV or OLV?
Usually a liquidation premise. Lending and SBA collateral files typically call for Orderly Liquidation Value (OLV) or Net Orderly Liquidation Value (NOLV), because those reflect what the lender could recover in a compelled, time-limited sale. FMV is more common for a purchase, sale or financial reporting. Confirm the required premise with your lender before the appraisal starts.
Why is OLV lower than Fair Market Value?
Because OLV assumes time pressure and a wholesale channel. The seller is compelled to sell within a limited period, usually through dealers or auction, rather than waiting for the best retail buyer. That conservative scenario produces a lower number than FMV, which assumes an unpressured, fully marketed sale.
Can I give the bank an FMV appraisal instead?
Sometimes, but ask before you order. A credit file built on collateral coverage generally wants a liquidation premise, and an FMV-only report will come back for revision or a second engagement. Where the loan turns on the going-concern value of the business rather than on recovery, FMV may be exactly right. The cheapest version of this is one question to the lender before the appraisal starts. For the net recovery figure most advance rates use, see our explainer on Net Orderly Liquidation Value.