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5 4 V I N E YA R D & W I N E RY M A N A G E M E N T | M a y - J u n e 2 016 w w w. v w m m e d i a . c o m would be possible via capital or tra- ditional lending. Payments can be as little as $500 per month and leasing pro- vides a certain flexibility with equip- ment upgrades. A winery can lease bottling equipment or an entire line, typically on a five-year term, and decide to purchase at lease end or let it revert to the leasing company. This may assuage worries that the winery could be stuck with inad- equate equipment, for example, if product demand greatly outpaces production capability. T h e r e a r e c o n s t o l e a s i n g , though. The total costs over the lease term will be greater than purchasing the same equipment outright, and a winery that cannot demonstrate several years of posi- tive cash flow is likely to be charged higher payments. It should go with- out saying, but seek accounting advice and weigh all considerations and fine print, including equipment such as a semi-automatic filler and auto labeler, is around $45,000," says DiDonato. In a perfect world, a winery plans to acquire a bot- tling line years before the actual purchase, incorporates the cost into the annual operating budget, and eventually completes the pur- chase and any housing construction with capital on hand. For instance, Jordan established its bottling line objectives and budget roughly five years before purchase. However, if a winery requires a bottling line prior to saving ade- quate capital, leasing may be pos- sible. Equipment dealers typically don't handle leasing, but they can connect wineries to leasing compa- nies and are experienced working through the process with both par- ties. Leasing has advantages such as requiring no down payment, tax breaks, customized payment schedules and facilitating access to more sophisticated equipment than insurance requirements, buyout options and fees, determination of fair market value at the term end and disposition or purchase fees. When Kruse, Fifer and Pearmund were asked if their respective win- eries ever considered leasing, the answer was unanimously against. "There's no economic advantage to leasing a line," says Pearmund. "The lease holder must pay taxes and pass that through to lease payments, whereas ownership is often property tax-free, depending on state law." All three grew their businesses over time and budgeted acquisitions into their cash flow well ahead of purchasing in accordance with planned production growth. OPERATION AND MAINTENANCE B o t t l i n g l i n e o p e r a t i o n r u n s smoothest when at least one per- son is appointed as a dedicated operator-maintainer. This person • Our Bo ling Lines are Maintained to the Highest Standards • Pricing & Flexibility Op ons – Unmatched • Smooth & Efficient Produc on • 14 Trucks Proudly Serving CA – OR – WA • Clean & Sanitary – Lowest Oxygen Pickup • Our Staff is Friendly & Accommoda ng Customer Service is Our Highest Priority www.signaturebo lers.com to see our video brochure Email: david@signaturebo lers.com Phone: 503.655.4012 Designed For the Most Discriminating Winemakers