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Leasing, Finance & Loan Security Valuations
Comprehensive Valuations
Leasing, finance, or loan security valuations are assessments conducted to determine the value of an asset that will serve as collateral for a lease, finance agreement, or loan. When individuals or businesses seek financial assistance from lenders or lessors, the lender or lessor may require security to mitigate their risk in case the borrower defaults on the loan or lease.
The asset used as collateral must be valued to ensure it has adequate value to cover the loan or lease in case of default. Mitchell & Taylor provide market-based valuations for asset security and finance requirements.
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Asset Based Lending
Leasing Security Valuations
In leasing arrangements, the lessor (the owner of the asset) allows the lessee (the user of the asset) to use the asset for a specified period in exchange for lease payments. Leasing security valuations involve determining the fair market value of the leased asset to ascertain its adequacy as collateral for the lessor.
The valuation helps the lessor assess the risk associated with the lease and enables them to set appropriate lease terms and conditions.
Finance Security Valuations
In finance agreements, such as loans or financing arrangements, the lender provides funds to the borrower, and the borrower pledges an asset as collateral to secure the loan. Finance security valuations involve assessing the value of the asset to ensure it is sufficient to cover the loan amount if the borrower defaults.
The lender relies on this valuation to determine the loan-to-value ratio and establish the appropriate terms and interest rates for the loan. This advice is typically provided reflecting a series of optional valuation scenarios for the assets, including:
the assets are valued as a whole, in place, as part of an operating business
the assets are valued as a whole, in place, but on the assumption that the business is closed
the assets are valued as individual items for removal from their current location with a restricted timeframe for marketing and disposal
the assets are valued as individual items for removal from their current location with a reasonable timeframe for marketing and disposal
residual value estimates at the cessation of the lease terms
Loan Security Valuations
Loan security valuations are similar to finance security valuations, involving the assessment of an asset’s value used as collateral to secure a loan. Banks and other financial institutions often request loan security valuations before approving a loan to ensure that the asset has enough value to cover the loan amount if the borrower defaults.
The valuation process typically involves a qualified valuer conducting an independent assessment of the asset. The valuer considers various factors, including the asset’s market value, condition, remaining economic life, and comparable sales in the market. The goal is to determine an accurate and fair value that represents the asset’s worth at the time of the valuation.
For businesses and individuals seeking financial assistance, having a reliable and comprehensive leasing, finance, or loan security valuation is crucial to gaining the trust of lenders or lessors and securing favorable terms for the loan or lease agreement.
