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Why Do Lenders Need a CMEA?

June 9, 2010

Over the past couple of years, bankers and lenders have been actively seeking new ways to reduce their liability when making loans. Often, lenders are asked to make a lending decision that involves knowing the value of a piece of machinery or equipment, and one of the best ways they can protect themselves is by hiring a certified machinery and equipment appraiser (CMEA) to do the job. It is a mistake to guess at the value of a piece of equipment, both because the guess could be incorrect and because a guess would make it difficult to support a loan decision. It also is not a good idea to base the value of a piece of machinery on the depreciation schedule. Depreciation schedules, although valuable to business owners and accountants, will not provide the fair market, orderly liquidation, and forced liquidation values of the equipment, and these three values would become important in the event of a loan default.

To reduce their liability, lenders making loans for the purchase of equipment should be sure that the appraisal is conducted by a certified professional. CMEAs meet all government training requirements, and will provide appraisal reports that are USPAP compliant and will stand up to scrutiny in a court of law.

By: NEBB Institute

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