Until recently, most people didn’t think much about distribution unless they worked in the industry. But in 2020, demand for deliveries skyrocketed. We’re still feeling the effects that a breakdown in the supply chain can have on our everyday lives. Now, an industry many people took for granted is front and center in a way it never was before.
If your business is looking to implement new technologies and equipment to increase efficiency, mitigate hiring shortages and otherwise manage lean, you’ll need equally efficient financing options to help you accelerate the path to implementation. But first, let’s look at some of the ways businesses are adapting to today’s supply chain challenges.
Technologies that were waiting in the wings are seeing not only increased implementation across the country, but in many cases urgent and immediate adoption. New AI and IoT (Internet of Things)-enabled equipment are launching a new era in distribution and warehousing. Where labor shortages and inefficiencies have slowed down business, solutions are increasingly driven by automation.
Forklifts are increasingly becoming part of the new IoT, a series of devices connected to a network. Some need little or no human interaction. Your Apple Watch, Ring Security System, and Google Nest are just a few examples. They upload information to the internet 24/7 and can be controlled from just about anywhere.
Perhaps the most famous example of how automation and new tech are driving big business is Amazon’s fleet of orange drive robots. Tens of thousands of two-foot square robots move thousand-pound pallets full of products around the company’s warehouses. They’re quick, efficient, and don’t need a dental plan.
Artificial Intelligence (AI) enables automated equipment to interact smoothly with objects and workers. We’ll see more and more mixed workspaces as human labor meets automated labor. The goal is to combine efficiency with safety and show how the new tools can make workers’ lives easier.
The rise of 5G and new fuel technologies are two more advancements to look out for. The bottom line of all this great new tech is that businesses that don’t keep up with it may soon be left behind. The downside of automation, however, is that it comes with a hefty price tag.
Here are just a few ways that small businesses can keep up with this new tech without going broke.
Equipment Loans
In most cases, it will take more than just a few tweaks to your current equipment to bring it up to speed. To get a 5G-enabled forklift, for example, you’ll need a completely new machine. You’ll also need to make sure your warehouse can get a 5G signal.
An equipment loan will put both upgrades within reach. You can upgrade right away to start realizing the efficiency benefits of new equipment sooner rather than later. For most managers and warehouse workers, the new tech will present a learning curve. The faster you can put new devices to work, the sooner you’ll be able to integrate them with your current systems.
No matter the size of your business or how much new tech you want to take on, you can find an equipment loan that will help make it happen. Onboard the new equipment today and pay for it later, as you see improved workflow and order fulfillment.
Equipment Leases
How do you know an AI-enabled robot will do the tasks you need it to? Is it reliable and safe? How long will it be before even newer technology comes along to replace it? If you’re asking yourself these questions, you’re not alone. For a lot of business owners, the pace of new tech can seem a bit too fast.
If you’re not ready to dive in with both feet, an equipment lease could be the answer for you. Leasing offers a “try before you buy” experience, so you don’t have to commit to adoption right away. And if a newer advancement does come along, it’s easy to upgrade. Plus, repairs, maintenance, and networking are included in most leases.
SBA Financing
The Small Business Administration focuses on helping businesses with $5M or less in annual revenue. Even if other lenders have decided not to take a chance on your business, the SBA can help. Several SBA loans will cover the cost of new tech and equipment.
An SBA 7(a) loan is a flexible solution that will provide up to $5M in financing for new equipment to eligible businesses. When used for equipment, the SBA 7(a) loan has a 10-year maturity period. Interest rates are based on the Prime rate. The longer you have the loan, the lower your interest rate will be.
The SBA 504 loan is another financing solution geared toward helping small businesses afford to upgrade their vehicles and machinery. The 504 is a long-term fixed-rate option available through Certified Development Companies. A qualified broker can help you find the right CDC to handle your loan. In most cases, you can get 90% financing or more.
Hard Money Loans
A hard money loan lets you use the value of your company’s assets to secure financing for new equipment. The two main benefits of hard money loans are fast approvals and focus on asset value rather than credit scores. Lenders look at assets like real estate and shares and base their funding on the asset’s value. That means you can get a hard money loan, even if your credit isn’t what you’d like it to be.
If you own a warehouse, for example, a hard money loan gives you a percentage of its market value. A warehouse that’s worth $900,000 at a 75% LTV will get you $675,000 to spend on new equipment. Because hard money lenders don’t have to meet the same requirements as banks, you can get the money in as little as 24 hours.
Final Thoughts
Automated distribution and AI technology are coming, whether your business is prepared for it or not. We’ve already seen successful implementation at top companies and some of the world’s biggest equipment manufacturers have already started developing new machines. Getting up to speed will require flexibility, planning, and training. With the right financing, you can get started before the competition.