How Equipment Finance Can be a Force for Growth in the Food and Beverage Industry

Two key trends will drive the food and beverage industry in the near term. As the industry contends with a tight labor market, companies need to upgrade equipment and adopt automated tools to improve their productivity. Additionally, more companies are embracing green energy initiatives to reduce costs and improve their sustainability.  

Each of these goals requires significant capital. Meanwhile, companies still need sufficient working capital to fund their growth and expansion plans. For many food and beverage companies, equipment financing solutions, including alternative structures such as a tax-exempt industrial revenue bond (IRB), are cost-effective tools for supporting both their near- and long-term goals. 

At its core, equipment financing provides flexible access to funds and preservation of working capital. Here are a few recent examples of how some of our clients used equipment financing to help offset labor challenges, free up cash flow to fund an expansion, or extend their geographical reach:  

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  When a Midwestern producer of ready-to-sell baked goods completed a new food production facility, the company wanted to install automated food processing equipment. Using term-debt equipment financing tailored to their needs, the company was able to improve productivity and efficiency while reducing costs. The structure also provided the company with the flexibility to maintain working capital as it continues to expand its reach nationwide. 

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  A Pacific Northwest-based contract manufacturer of organic snack foods for leading brands recently built a manufacturing and distribution facility in the Southeast. Given the company’s importance in its customers’ value chain, being close to major distribution points is critical. Prior to the expansion, the company was mainly focused on the West Coast. Equipment financing enabled the company to expand its geographic reach, cutting transportation costs and streamlining logistics in the process. 

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  An Upper Midwestern producer of cheese products used a fixed-rate term loan to finance a new automated cheese processing line, which enables the company to increase productivity while cutting costs. In a business where margins are razor-thin, any efficiency gains are magnified. 

Equipment financing also provides companies with alternatives that enable them to continue to grow their business and become more productive. One such alternative is an IRB, which is geared toward growth investment on both the equipment and property sides.  

One manufacturer we work with purchased a business with an eye toward expansion. The company is evaluating its financing options, including an IRB. Because the tax-exempt bonds would apply to both the equipment and the real estate associated with the expansion, an IRB would allow the company to execute its expansion plans with less of a cash outlay.  

And as the industry's energy demands continue to grow, more companies are embracing green energy initiatives, particularly solar power. Along with making their operations more energy efficient and sustainable, solar power can provide food companies with an additional revenue stream by feeding surplus energy back into the grid. While the long-term benefits are compelling, green energy projects require significant capital. It’s another scenario in which equipment financing can provide flexible solutions. 

For food and beverage companies, understanding the range of equipment financing options will help you find the solution that’s best for your unique needs, whether it’s financing new equipment to make your operations more efficient or tax-exempt options for expansion projects. Working with a partner that understands the dynamics of the food and beverage industry means you can get the creative financing structures that will help position your business for sustainable growth. 

Learn more about the Equipment Finance team and our capabilities.