As a leading global technology manufacturer and supplier, this company needed to make a number of investments in equipment and software for multiple locations throughout the fiscal year in order to stay competitive. By the end of the year, the various capital investments tallied up to more than $2.5 million, thus draining a considerable amount from the company’s cash reserves. Executives sought an innovative solution to smooth out the budget spike and restore funds in the most cost-effective way possible.
First American was able to provide a custom solution to match the manufacturer’s unique needs. By providing a cash reimbursement for equipment and software purchases, the company was able to return cash to the books and pay just a low, predictable monthly payment over time. This sale-and-leaseback transaction involved two structures with operating lease treatment for half of the project covering equipment and software in California and the remaining half placed on a capital lease to avoid double taxation of operating leases in Missouri.
The cash reimbursement allowed the manufacturer to use leasing to diversify its funding sources while also stabilizing its cash flow. With knowledgeable consultation from First American, the deal was carefully structured in a way that maximized tax efficiencies across multiple states. Now, with cash back on the books and state of the art equipment on the production floor, this company is ready to continue driving innovation and growth in the years ahead.