Glossary · underwriting

Liquidation value OLV / FLV

Also called orderly liquidation value, forced liquidation value, net orderly liquidation value, NOLV.

What collateral realistically fetches in a distressed sale after costs — the number that actually sets advance rates, and far below book value or what you paid.

Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.

What it means

A secured lender's recovery is not the asset's value to you. It is what a third party pays for it, sold quickly, by someone with no interest in getting the best price, minus the cost of getting it sold.

The three measures

  • Fair market value: a willing buyer and a willing seller, adequate time, no compulsion. The highest number and the least relevant to a lender
  • Orderly liquidation value (OLV): sold over a reasonable but limited period, typically a few months, by a professional liquidator. Below FMV
  • Forced liquidation value (FLV): auction, immediate, as-is where-is. The lowest number
Netorderly liquidation value deducts the costs of realisation — removal, transport, storage, refurbishment, auctioneer's commission, appraisal, legal. NOLV is what an ABL advance rate is actually calculated from, and the deductions are not trivial for anything heavy or installed.

What moves the appraisal

Whether a secondary market exists and is deep. Whether the asset is mobile or has to be dismantled. Whether it is generic or configured for one process. Age against useful life. Whether title is clean and transferable. Software and licences that do not transfer with the hardware. Leasehold improvements, which are worth essentially nothing to anyone.

Where borrowers meet it

Equipment finance sizing, ABL advance rates on machinery and inventory, and any restructuring conversation where the alternative to a deal is a liquidation. It is also the floor under the going-concern value in a business sale.

Where this one catches people

Owners argue advance rates using purchase price or depreciated book value. Neither is the lender's number and neither is negotiable by argument — the appraisal is. Installed and specialised equipment is where the gap is widest: a custom production line that cost $400,000 and works perfectly can appraise at a small fraction of that on a net orderly basis, because dismantling and moving it costs more than most buyers will pay. That is not a lender being conservative; it is what the machine is worth to anyone other than you.

Worked through

Illustrative. A CNC machine purchased three years ago for $250,000, with $175,000 of book value remaining.

An appraiser assesses fair market value in continued use at $150,000, orderly liquidation value at $90,000, and forced liquidation value at $55,000. Removal, rigging and sale costs of $12,000 bring net orderly liquidation value to $78,000.

An advance rate of 70% of NOLV supports roughly $54,600 — against an asset the owner values at $175,000.

Figures in the example are illustrative. They show the arithmetic, not a quote — what any one lender would charge is on that lender's page, where it is published at all.

Where you will meet this term

Term Loan Equipment Financing Asset-Based Lending

Read next

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Liquidation value — common questions

What does liquidation value mean?

What collateral realistically fetches in a distressed sale after costs — the number that actually sets advance rates, and far below book value or what you paid.

Where does liquidation value catch people out?

Owners argue advance rates using purchase price or depreciated book value. Neither is the lender's number and neither is negotiable by argument — the appraisal is. Installed and specialised equipment is where the gap is widest: a custom production line that cost $400,000 and works perfectly can appraise at a small fraction of that on a net orderly basis, because dismantling and moving it costs more than most buyers will pay. That is not a lender being conservative; it is what the machine is worth to anyone other than you.

Is liquidation value the same as an interest rate?

Liquidation value is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.

Which products does liquidation value apply to?

Term Loan, Equipment Financing, Asset-Based Lending.

Is there a worked example of liquidation value?

Yes, on this page, and it is labelled illustrative. It shows the arithmetic, not a quote from any lender.

What else should I read alongside liquidation value?

Advance rate, Collateral, Going concern, Haircut, Inventory financing.

Has this definition been checked?

Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.

Is this legal advice?

No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.

Can I suggest a term?

Yes — [email protected]. The glossary grows from what people are actually shown in contracts.