Updated September 02, 2026
Quick answer
They are the same equipment sold on different clocks. Orderly liquidation value assumes a reasonable marketing period to find the right buyer; forced liquidation value assumes it must go quickly, usually at auction. FLV is the lower number, often considerably, and which basis your lender advances against matters more than the appraiser's opinion of the machine.
Four Numbers, One Machine
An appraisal report can carry several values for the same asset, and quoting the wrong one is the most common reason an owner's expectation and a lender's offer are far apart.
| Basis | Assumes | Relative level |
|---|---|---|
| Fair market value | Willing buyer and seller, no time pressure, in continued use | Highest |
| Orderly liquidation value (OLV) | A sale, but with a reasonable marketing period | Lower |
| Forced liquidation value (FLV) | A quick sale, typically auction | Lower again |
| Salvage or scrap | No longer viable as working equipment | Floor |
The spread between the top and the bottom of that table is not a rounding difference. On specialised equipment it can be most of the value.
Why Lenders Reach for the Lower Numbers
A lender is not estimating what your machine is worth to you. They are estimating what they would recover if they had to sell it, in circumstances where you are not paying and the sale is not leisurely.
That is precisely the definition of a liquidation basis. Fair market value assumes an unhurried transaction between willing parties, which is the opposite of a recovery scenario, so it rarely governs a secured advance even though it is the number owners quote.
Which of OLV or FLV a lender uses depends on the asset and their own risk posture. Common, liquid equipment with a deep resale market can be advanced against OLV; specialised or slow-moving equipment tends to be priced closer to FLV, because that is the realistic outcome.
What Widens the Gap
The distance between OLV and FLV is not fixed. It is a proxy for how hard the asset is to sell:
- How many buyers exist. A common skid steer has a deep market; a bespoke production line has a handful of plausible buyers worldwide.
- How mobile it is. Equipment that must be dismantled, rigged and transported loses value to the cost of moving it.
- Whether it is installed. An asset bolted into a building is worth less than the same asset on a trailer.
- How fast the technology moves. Where new models obsolete old ones quickly, a forced sale falls further.
- Where it is. Remote locations narrow the buyer pool and add freight to any sale.
Owners of highly specialised equipment are often surprised by the advance, and this is why. The machine may be excellent and expensive and still be difficult to sell quickly, which is the only question the basis is asking.
Book Value Is a Different Question Again
Worth separating clearly, because it causes real confusion.
Book value is an accounting figure — what you paid, less depreciation taken under the rules in IRS Publication 946. Equipment expensed aggressively under Section 179 can carry a very low book value while remaining genuinely valuable in the market.
The reverse also happens: an asset can sit on the books at a substantial figure while the resale market for it has collapsed.
Lenders do not advance against book value. It answers a tax question, not a recovery one.
What to Ask Before the Appraisal
- Which basis will you advance against? The single most useful question, and it is rarely volunteered.
- What advance rate applies to that basis? A high rate on FLV can be worse than a lower rate on OLV.
- Will the report include more than one basis? Most do, and it is useful to see the spread.
- Does installation cost come off? On fixed plant the removal cost can be material.
Comparing two lenders on advance rate alone is meaningless without knowing the basis each applies it to. See how appraisal value sets loan-to-value for how the two combine into an actual number.
Frequently Asked Questions
What is the difference between orderly and forced liquidation value?
The assumed selling time. Orderly liquidation value assumes a reasonable marketing period to find the right buyer; forced liquidation value assumes a quick sale, usually at auction. FLV is the lower figure, often by a wide margin.
Which value do lenders use?
A liquidation basis rather than fair market value, because they are estimating recovery rather than an unhurried sale. Common, liquid equipment may be advanced against OLV; specialised or slow-moving assets tend to be priced closer to FLV.
Why is my specialised equipment valued so low?
Because the basis asks how quickly it could be sold, not how good or expensive it is. A machine with few plausible buyers, high transport cost, or installation that must be undone falls a long way on a forced basis regardless of condition.
Is book value the same as appraised value?
No. Book value is what you paid less depreciation taken for tax purposes. Equipment expensed under Section 179 can carry almost no book value and still be worth a great deal, and the reverse happens too. Lenders advance against market-based value, not book.
What should I ask a lender about valuation?
Which basis they advance against, and what advance rate applies to that basis. A high advance rate on forced liquidation value can produce a smaller loan than a lower rate on orderly liquidation value, so comparing rates alone is meaningless.
Sources & Further Reading
- IRS Publication 946: How To Depreciate Property — The authority on depreciation and Section 179 for business equipment - book value, which is a different number from market value.
- SBA 504 Loan Program — Federal program terms for fixed-asset lending, where independent valuation is part of the process.
- Federal Reserve Senior Loan Officer Opinion Survey — Quarterly survey of bank lending standards, including how collateral requirements move with credit conditions.
Figures above describe ranges commonly seen across lenders and reflect published guidance as of the date on this page. Confirm current terms with the cited source or your lender before acting.