Equipment Financing Can Be Puzzling
Equipment Financing Equipment Financing Can Be Puzzling
Author: Casey Marie Long
Date posted: 05.25.22

During the early days of the pandemic, supply chains were thrown into disarray. Items that were normally readily accessible could no longer be found (remember the TP shortage of early 2020?) while other items became less used (such as vehicles). Because people were stuck at home, any activities that took one’s mind off the doldrum found themselves suddenly popular. One company, a puzzle manufacturer located in Florida, found that it could not produce enough puzzles to meet demand.

Puzzles have been around for centuries but, prior to the pandemic, people usually reserved them for vacations or family gatherings. Sitting at a table without devices for hours on end didn’t appeal to a lot of people until there was little else to do. When the pandemic sent demand skyrocketing, the puzzle manufacturer found themselves in a challenging situation. Equipment financing can be puzzling, needing additional equipment to increase their production capacity. With their current machines running 24 hours a day, they were still unable to keep up. Wholesale orders increased rapidly as retailers scrambled to meet consumer demand. Once again, equipment financing can be puzzling, but they knew it was necessary to invest in their business’s future success.

 

The company, though well-positioned to increase its market share, had depended on steady demand for over a decade. Because of this, they did not maintain significant cash in the company accounts. The specialized nature of the equipment caused the additional manufacturing equipment and custom packaging equipment to cost $600,000. When it came time for a new purchase, they opted for an equipment lease to finance additional puzzle manufacturing equipment and packing machinery.

Equipment Financing Can Be Puzzling

After installing the new equipment, they were able to increase their production capacity by over 35%. Along with the increase in prices during the period of high demand, the company had its most profitable year ever.

 

The company expected the demand to drop off fairly quickly once the market reached saturation, but they have found that people have remembered the enjoyment that family activities bring, and demand has not dropped off as quickly as expected. Because of this, the company is considering purchasing the equipment at the end of the lease. The terms of the lease provide them the option to buy the equipment at the fair market value when it ends.

Once they had successfully applied for the loan, they could purchase the equipment within three days. It took a few weeks to deliver, but they were up and running within a month of their initial application. The 5-year term of the loan kept their loan payments reasonable compared to their operating income.

The new equipment cut the manufacturing processing time by 50%, and they were able to spend less time overseeing the actual manufacturing. With the additional time available, they focused their attention on marketing and building their business.

Equipment Financing Can Be Puzzling
About The Author | Casey Marie Long

Casey has 12 years of technical writing experience. She is also a CPA and bookkeeper. Casey graduated from the University of St. Thomas (Minnesota) with a B.A. in mathematics and currently resides in San Diego, CA.

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