Upgrading to 4IR Technology

Feb 12, 2024

As a wave of new technology transforms the way the world does business, it’s easy to feel overwhelmed. Even businesses that rely on age-old craftsmanship and handworked detail find that they must adopt new tech to market, ship, and inventory their products effectively. The global transformation many are calling a new industrial revolution is here and threatens to drown businesses that can’t keep up.

However, the progress made possible by 4IR technology can be a godsend for businesses that choose to embrace it. If done strategically, any business can make a smooth transition to new tech without disrupting their workflow and productivity. This article focuses on a powerful financial tool that enables businesses to update without wasting time or capital.

The tool is a sale-leaseback and it provides an immediate capital infusion while your business continues to operate known equipment as it purchases and onboards new technology. Let’s take a closer look at how a sale-leaseback works and how it can benefit your business.

What is a Sale-Leaseback?

A sale-leaseback is a transaction in which your company sells its equipment or real estate property to a buyer. But instead of halting productivity and transferring the asset over to the buyer, the asset stays where it is and continues to operate as before. Your company continues using the asset under a new lease agreement with the buyer.

Most equipment leases include maintenance and repair costs so you no longer have to worry about managing those expenses as they arise. At the end of the lease term, you can choose to surrender the existing asset if you’re prepared to make the switch. If you’re not ready to upgrade, you can renew the lease for another term or continue to use the existing asset in tandem with new assets.

Advantages of a Sale-Leaseback

A sale-leaseback offers several advantages to companies looking to upgrade their technology. The first of these advantages is an immediate infusion of capital without the need to take out a loan. Your company will get a lump sum based on the fair market value of the property. That capital can then be used to purchase new equipment, pay for training personnel on new technology, and build infrastructure to house new technology.

Another advantage to a sale-leaseback is that it reduces downtime while your company switches to new technology. If you plan to purchase your new equipment with funds from the sale of existing equipment, you can still do so. However, without a sale-leaseback, you’ll need to stop work while you handle the purchase and bring in the new tech. The longer it takes to implement your new workflow, the longer you’ll miss out on earning revenue.

It’s possible that, once you’ve decided to move to a new 4IR device, you’ll find that it doesn’t fit as seamlessly into your workflow as you’d hoped. Maybe the learning curve for operating the new equipment is steeper than expected. Perhaps new infrastructure needs to be in place before the equipment can perform as desired.

When you’ve used a sale-leaseback, it’s not too late to pause implementing the new equipment while you make the necessary adjustments. Or, you can decide it’s not the right time to upgrade. With a sale-leaseback, you still have the power of your current equipment behind you.

Sale-Leaseback Case Studies

A sale-leaseback is a great option for any industry with a technological leap that requires staff to upskill before bringing new equipment into full production. But if you’re still not sure that a sale-leaseback is right for your business, here are a few examples of how businesses can use a sale-leaseback effectively to make the leap to 4IR technology.

A logistics firm in Littleton, CO has identified several target improvement areas in its flagship warehouse. Going into the new fiscal year, its goals are to keep a more accurate inventory, increase fulfillment speed, and retain workers who are aging out of more labor-intensive tasks but have built a valuable knowledge base over their time with the company. To reach these goals, the firm has decided to upgrade to a new intelligent warehouse. The new warehouse will have automated inventory tracking, a pick-to-light system, and robotic forklifts.

To switch to their new warehouse, they’ll continue production at the current location but use a sale-leaseback to generate immediate capital from their property. As the firm leverages its current assets, it will train its seasoned workers on the new system and hire temporary workers to close out the old warehouse.

Another case study comes from a startup media company based in Cherry Creek, CO. The two brothers who launched the business from their home office were looking to add animation to their menu of services. They decided to leverage the equity in two of their film cameras to purchase animation software and training courses. However, they needed their cameras to film several commercial projects currently under production. Using a sale-leaseback, they were able to generate the capital needed to learn animation without losing progress on the commercial projects.

In Pueblo County, CO, a specialty greenhouse was receiving more orders than it could fill and had to turn down business because their greenhouse was operating at full capacity and couldn’t keep up with demand. Their competition, a neighboring farm, was happy to soak up their overflow business. Instead of watching their competition outgrow them, the greenhouse used a sale-leaseback to open a new grow facility nearby. With the increased capacity, automated water monitoring system, plant rotation devices, and a solar power generator, the company quickly caught up with demand and became the largest producer of specialty crops in the area.

Those are just a few examples of how a sale-leaseback helped businesses in different industries reach their goals. If you want to stay current with 4IR technology, improve workplace safety, and enhance your company’s productivity, consider a sale-leaseback. Speak with our brokers about your transition plan so you never have to slow down the pulse of production.