Chuck Sharbrough, Senior Vice President, Director - Food, Beverage and Agribusiness at Key Equipment Finance, shared three key considerations for upgrading equipment in Food Industry Executive.
Sharbrough wrote that equipment financing allows food manufacturers to upgrade, conserve cash and remain competitive.
“Utilizing modern, well-maintained equipment is imperative for food manufacturers to safely increase productivity, manage operational costs, and remain competitive in their market is a costly challenge for companies that plan to purchase the equipment with cash.”
Specific types of financing solutions
Sharbrough highlighted specific types of financing solutions for the agricultural sector, including: equipment lease, asset finance and customized solutions.
“Manufacturers also gain flexibility, as payments can be designed to match budget requirements, and terms aligned with the equipment’s useful life.
Sharbrough went on to say that asset finance is a financing option that includes both the equipment and soft costs associated with it, such as installation and maintenance. “With this option, processors acquire what they need to manage their business, typically with no advanced payment and one fixed monthly payment,” Sharbrough wrote.
Sharbrough also mentioned customized financing options as a way for manufacturers to maximize equipment depreciation and tax credits while minimizing income tax liabilities.
Three key considerations
Sharbrough listed three key things to consider when financing equipment:
- Return On Investment considerations
- Details of each financing option
- The finance team you will be working with
To assess the ROI, one thing to consider is how the equipment will impact business operations, Sharbrough wrote. To evaluate the details of each financing option, manufacturers should make sure they are clear on the specific lease conditions, renewals and additional fees.
He included questions manufacturers may want to ask themselves before selecting a finance team. “Business owners should be bold in asking their potential financing provider the tough questions so they can truly evaluate and select the ideal team,” Sharbrough wrote.