When a forklift reaches the end of its serviceable life, manufacturers need to secure a replacement - fast. So when this Midwestern snack food manufacturer realized its forklifts were ready to be put to pasture, the company knew it was time to act. However, this was not part of the current-year budget and existing bank covenants restricted the company from taking on additional debt.
The forklift vendor offered the ability to finance the forklifts via an FMV lease, but there was a catch: Their lease included restrictions on usage hours. Given that these forklifts would be the workhorses of the company's warehouse, these limitation were a serious concern. Facing limited alternatives, the company sought a flexible, budget-friendly solution that would let them use the forklifts the way they wanted.
First American provided exactly the right solution with a fixed fair-market value (FMV) lease. Terms of the lease included a known purchase price at the end of the lease, with no usage restrictions at all, and finance rates that the equipment vendor simply could not match. These cost-effective and business-friendly terms ensured the company could protect its cash flow and existing bank relationships while still providing access to the equipment it needed to keep its product moving.
With First American's Fixed FMV solution, the company was able to keep its debt convenant intact by writing off the lease expense each month as a predictable operating expense. Seeing firsthand the benefits of equipment leasing, the company is now exploring financing other assets - an option that lets them strengthen their bottom line while achieving their strategic business goals.