This loan covers business equipment or machinery purchase. Valuation can be up to 80 per cent of purchased assets. If requesting a refinancing loan, valuation is often 75 per cent of the appraised business asset value. Chattel mortgages on household goods are rarely accepted because of high depreciation. Most lenders are reluctant to seize these assets.
Some banks require term insurance for the key persons in the small business.
Insurance policies must name the bank as the primary policy beneficiary. The bank may also request assets be insured to replacement value. Banks need margins of protection because inventory may become obsolete, have limited market appeal or become unsaleable for other reasons. This is often valued at 50 per cent of the replacement cost. Valuation may range from 20 to 50 per cent of replacement cost.