Operational efficiency is often key to managing growth, particularly for businesses that must stock large inventories. Take, for instance, an Italian tile manufacturing company. Its U.S. business was growing at a blistering 25% annual growth rate, and efficiently managing its 500,000-square-foot warehouse in Kentucky was a major, ongoing challenge.
To streamline their internal processes, the company sought to update their entire ERP and warehouse management system. This coincided with the need to purchase 25 new forklifts; onboard computers added to the forklifts would integrate with the new ERP system and allow for real-time inventory data updates.
Although the company was willing to pay cash for the forklifts, the computers would add a hefty $159,000 to the cost. Moreover, the company had just launched a new banking relationship and was concerned about debt restriction covenants, so traditional financing was not an option.
Our team approached the company with a suggestion to execute a Fair Market Value (FMV) lease to acquire the computers without negatively impacting cash flow or adding a liability to their balance sheet. A lease would also provide the flexibility to return the old computers and upgrade to new technology at the end of the lease.
The company hadn’t been aware that leasing was an option for this unique purchase, but they immediately recognized the advantages and were eager to move forward. First American responded quickly, and the lease was approved within just five business days.
The lease now allows the company to expand their existing technology refresh program and keep all of its technology – right down to the computers on the forklifts --- continually up to date and operating at peak efficiency. And with First American’s online asset management system, the management team is able to easily track all of the lease components, which enables easier end-of-lease planning and decision-making.
Thanks to First American’s quick response and willingness to develop a creative solution to a pressing need, the company is thrilled to be on track to hit their growth targets for the year.