By Collin Harbour
Risks and threats are precursors to corporate crisis situations. As many lenders attest, visiting a property for an equipment inspection only to find the hardware damaged or missing creates immense anxiety and risk. Lender success requires excellent asset management, which includes ensuring the equipment portfolio is observed and recorded. How can lenders protect their investments and their overall portfolios to ensure these unwelcome surprises don’t occur?
Regular Equipment Site Inspections (ESIs) address these concerns. With ESIs, lenders are able to validate the presence of business equipment, appraising the value and confirming its worth. Especially useful in the case of a bankruptcy or liquidation process, ESIs often assist in preventing default on loans and investments.
What do ESIs encompass and what do you need to know? Read on for important considerations about ESIs in order to protect your portfolio.
How Do They Work?
When an ESI is conducted, a field inspector visits the business site, observing and examining the business collateral, while collecting information about the unit and other business attributes of the establishment.
A qualified inspector, usually hired by a third party, schedules a visit, whether located in a rural, suburban or urban local as well as residential or commercial property. The inspector uses a detailed checklist to verify the existence of specific equipment and provide other property and/or business attributes. Before the process begins, the lender details all pieces of equipment to check, and then the inspector prepares a report based on his or her findings, including photos of the business’ front exterior, address verification, and specific equipment requested.
Provides Reliable Value Information
Based on the ESI report, lenders gain confidence on their lending transactions. Through the process, a reliable and verified ESI portrays the authenticity of the loanee’s financial information while also monitoring equipment in case of deterioration, bankruptcy, or liquidation of collateral.
According to the National Equipment Register (NER), the value of stolen equipment annually is estimated to be between $300 million to $1 billion. During an ESI, the inspector reviews and documents all serial numbers on equipment pieces while providing photo evidence of each serial number.
With this information, a lender is able to compare this information to the original order, confirming the physical pieces on site match to the pieces initially purchased. Ultimately, routine inspections help decrease theft by ensuring that documented pieces of equipment still exist, having not been moved or stolen.
As a result of an ESI, the inspection removes the guesswork and reduces any risk of data misinterpretation. While equipment site visits do not eliminate all business issues, they often reveal problems early on, providing banks and other financial institutions information needed to be more proactive while protecting their investments.