Orderly liquidation value (OLV)

Buyers and lenders may meet this term when equipment is valued, for example as security for financing. It answers a narrow question: what the assets could bring if the business had to sell them, with enough time to find buyers. BDC says a regular transaction between two willing parties usually relies on fair market value, while liquidation value may be involved in a bankruptcy, so ask which basis a figure uses.

Orderly versus forced

BDC sets orderly liquidation value beside forced liquidation value, the estimated amount equipment could sell for at an auction held immediately. The CBV Institute’s valuation glossary makes the same contrast: forced liquidation presumes a sale with less than a reasonable period of market exposure. BDC adds that fair market value is typical when equipment is used as security for financing, though some banks may collateralize equipment on its forced liquidation value.

What to ask

• Which value basis the lender’s appraisal uses, and who prepared it.
• Whether the appraisal covers equipment, inventory or both.
• How the figure compares with the price in the purchase agreement.

See equipment pricing in a business sale for how the choice of value basis affects a deal.