In early 2021 North Carolina, an industrial bakery was continuously losing staff due to workplace injuries. The company supplied breads and pastries for restaurants. Though each cookie and loaf of bread was very small, lifting heavy pallets of the baked goods several times a day was causing the workers to hurt their backs at an alarming rate. Not only was being short-staffed a serious problem, the company’s workers' compensation rates were also skyrocketing.
After researching several solutions, the owners decided to install commercial-grade, custom machinery. They included conveyor belts to move the baked goods in and out of the ovens. The equipment would take much of the burden of lifting heavy items off of the bakers, thus resulting in fewer injuries. However, due to the custom nature of the equipment, the price of $800,000 was more than they had available.
The owners researched several options for financing the equipment. Though they intended to own the equipment for decades, they did not have the funds available for a down payment. Because of the cash limitations, they decided to obtain an equipment lease. It did not require a down payment, and the lease allowed them to purchase the equipment at the end of the lease period. With a 4-year commercial lease and careful planning, they were confident. They believed that they would be able to purchase the equipment at the end of the lease period.
The owners had credit scores that far exceeded the minimum scores needed to obtain financing, and they were able to provide the required two years of tax returns and other documentation needed to apply.
Despite quick financing of the commercial lease, supply chain constraints caused a 5-month delay in delivering and installing the equipment. Once the equipment was installed, the staffing constraints were eased and absenteeism dropped considerably. In the first 6 months the equipment was in place, there was not a single workers comp claim.
Because the owners reduced their staff requirements and considered the commercial lease payments reasonable, the business experienced an increase in its cash flow. This occurred even with the new equipment lease payments factored in. Now, they are actively contemplating ordering extra pieces of equipment to reduce labor costs and expand their business.
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.
