01
Make, Model, Serial Number & Year
Each major piece of equipment is identified from the nameplate and from your fixed asset register.
Bank Valuation Preparation
Before the Bank Valuation How to Prepare and What to Expect
When your bank asks for a Government Approved P&M Valuer’s certificate for your machinery hypothecation, this is a standard credit monitoring requirement — not a sign that the bank has concerns about your loan.
Banks typically require the certificate at loan sanction and every 2–3 years thereafter, with more frequent assessment for equipment in high-wear sectors or volatile secondary markets. Understanding what the valuer assesses, and what you can do to maximise your certified collateral value, is commercially useful for every factory owner with bank-hypothecated machinery.
VALUATION FOCUS
SECTION 34AB · CATEGORY IV
01
Prepare Before the Valuer Arrives
Condition, maintenance, utilisation and original equipment documentation can materially influence the assessment of plant and machinery collateral value.
WHAT THE INSPECTION COVERS
What the Government Approved P&M Valuer Inspects
The physical inspection at your factory is designed to establish the identity, condition, utilisation and supporting evidence for the major equipment included in the valuation.
A well-prepared factory allows the valuer to assess the machinery thoroughly and document the relevant factors supporting the resulting P&M valuation.
02
Physical Condition
External condition includes cleanliness, painting and corrosion. Mechanical condition covers noise, vibration and oil leaks. Electrical and structural condition, including switchgear, motors, control systems, frame integrity, foundation bolts and vibration isolation mounts, is also considered.
03
Maintenance Quality
The valuer considers whether maintenance logs are available and whether preventive maintenance is followed, including scheduled oil changes, filter replacements and calibration. A well-maintained machine has a lower physical depreciation rate and a higher DSV.
04
Operating Hours & Utilisation
Where an hour meter is available, recorded hours provide a direct utilisation metric. High utilisation, such as three-shift operation, reduces remaining useful life, while lower utilisation can extend it.
05
Recent Capital Investment
Significant recent expenditure such as rewinding, a major overhaul or a new CNC controller upgrade may extend remaining useful life and can influence the DRC assessment.
BANK REALISATION VALUE
Why Your DSV Is Lower Than Your MV
Understanding the difference between Market Value (MV) and Distressed Sale Value (DSV) is essential when machinery is being considered as bank collateral.
MARKET VALUE
MV
Orderly Market Transaction
Market Value (MV) represents what the equipment is worth in an orderly market transaction: a willing buyer paying a willing seller, with adequate time for both parties to assess and negotiate.
Willing Buyer + Willing Seller + Adequate Time
VS
DISTRESSED SALE VALUE
DSV
SARFAESI Enforcement Realisation
Distressed Sale Value (DSV) reflects what the bank may realise through a SARFAESI enforcement sale, where the transaction is forced and time-compressed and buyers know that the seller is not in a position to wait.
Distress Discount + Limited Buyer Pool + Removal Costs
WHY THE DIFFERENCE?
Three Commercial Factors Affect the DSV
01
Distress Discount
Buyers in a forced sale generally demand a distress discount because the transaction does not provide the same negotiation environment as an orderly market sale.
02
Specific Buyer Matching
A bank may not be able to match specialised equipment with the specific buyer who values its application as effectively as a broker operating in the secondary machinery market.
03
Removal & Transport
Removal and transportation costs for industrial machinery can reduce what a buyer is willing to pay when equipment has not yet been dismantled.
65–75%
Typical DSV range against MV for standard industrial machinery
75–85%
Typical DSV range against MV for commercial vehicles
Specialised
Narrow buyer pools can result in a lower DSV relative to MV
BEFORE THE INSPECTION
What You Can Do to Maximise Your Collateral Value
Preparation does not mean influencing the valuation. It means ensuring that the valuer has complete and reliable evidence when assessing the equipment’s condition, history and specification.
01
Maintain Complete Preventive Maintenance Logs
This is the single most commercially impactful preparation. Before the valuer arrives, ensure the maintenance log for each major piece of equipment is current, legible and available for review.
Each entry confirming a scheduled service, oil change or calibration adds to the valuer’s confidence in the equipment’s condition.
02
Complete Deferred Maintenance
If there is a known issue such as a leaking hydraulic seal, a motor requiring rewinding or an overdue calibration, completing it before the inspection can prevent the condition assessment from recording a defect that could increase the depreciation rate.
03
Keep Original Purchase Documents
Keep original purchase invoices, customs clearance documents for imported equipment and installation certificates ready. These documents help confirm the equipment’s actual year and specification and feed into the RCN computation.
04
Keep the Factory Floor Organised
A clean and well-organised factory floor makes equipment accessible for inspection. Machinery that can be assessed without requiring movement or removal of surrounding clutter can be more thoroughly inspected.
DOCUMENT READINESS
What Documents Should You Have Ready?
The quality and availability of supporting records can help the valuer establish the identity, specification, age, maintenance history and investment made in your machinery.
Prepare Your P&M Documentation Before Inspection
Keep the relevant records organised and readily
accessible for the valuation inspection.
N
SECTION N
Comprehensive P&M Documents Checklist
Review the complete checklist before scheduling or attending your Government Approved P&M valuation.
Fixed Assets • Purchase Records • Maintenance • Certifications
Government Approved P&M Valuation
Preparing for a Bank P&M Valuation?
Get your machinery records, maintenance evidence and supporting documents organised before the inspection. Discuss your requirement with the A2Z Valuers P&M valuation practice.